Consumer spending in the U.S. declined 0.1% in July, over the previous month. Thus, consumers are still afraid of spending their hard-earned money. Also, it is reflected in the quarterly results of most of the retailers. For instance, Kohl’s (KSS, Financial) reported a mixed second quarter recently as consumers were less willing to spend. It missed on the revenue expectation whereas earnings were ahead of the estimates. Let us take a closer look into it.
The mixed bag of numbers
Revenue for the quarter slipped 1.1% over last year, clocking in at $4.24 billion. But the analysts were expecting it to be $4.29 billion. The top line dropped due to a same store sales decline of 1.3%. However, this came in as a positive sign for the management since it was lower than that of the previous two quarters.
The retailer opened 4 new stores during the period and closed 2 existing stores. Also, it provided huge discounts to customers in order to clear its inventory which was stacked because of a weak winter season. These discounts not only reduced the top line, but also affected margins. In fact, margins shrank 100 basis points to 39%.
Nonetheless, Kohl’s earnings jumped 9% to $1.13 per share, over the prior year. This was higher than the analysts’ estimate of $1.07 per share. With efficient cost management efforts and initiatives to clear excess inventory, the retailer managed to register a decent bottom line.
On the other hand, peer Macy’s (M, Financial) reported a lackluster second quarter, wherein both the top line and the bottom line were below the analysts’ estimates. Although the retailer missed the expectations, it managed to post sales growth of 3.4% along with same store sales growth of 1.6%. Also, it lowered its outlook for the year.
Turnaround efforts
In order to bring back its sales momentum, Kohl’s is taking a set of initiatives. First, it is revamping its product line for the back-to-school season. This should attract more customers. Also, it will be adding more national brands, such as IZOD and Juicy Couture, this month. This addition is really important since more focus on private label brands enabled customers to shift to its peers. Hence, these new brands should help attract them.
Further, the retailer plans to expand its activewear segment through Puma and Gaiam yoga brands, providing customers more reasons to visit its stores. Also, it plans to expand its customer loyalty program, which offers additional discounts and benefits to customers with their regular purchases. This was, at first, a pilot program and will now be expanded to all the stores.
Moreover, it is concentrating its efforts on its online operations also. Kohl’s provide customers the opportunity to book their products and order it online, and later collect it from its nearby stores. This makes it easier for people to shop, since they don’t have to wait for the products to get in delivered in a few business days.
My takeaway
The department store retailer seems to be going on the right track. Its efforts are impressive and should help in attracting more customers. Further, the back-to-school season should be beneficial for the customers. Thus, its expansion into the active wear and the online business along with a broader product portfolio are some of the key points to look forward to. Hence, Kohl’s look good to go.
