US retailers and the holiday season – Kohl’s Corp. (KSS)

The holiday season is a big deal for retailers. The period from Thanksgiving to Christmas and New Year is a crucial time to rake in sales as people tend to go on shopping sprees at this time of the year. For this reason, retailers put in extra efforts to arrange their assortments and improve their delivery services in order to provide the best shopping experience for customers.

In this multi-part series, let’s take a look at how some of the major retailers have positioned themselves for the holiday season and beyond:

Kohl’s Corp.

Starting with Kohl’s Corporation (NYSE: KSS), the company posted declines in sales and adjusted earnings during the third quarter but is seeing a pickup compared to the previous quarter. The COVID-19 pandemic negatively affected back-to-school sales which took a toll on overall sales during the month of August. Sales picked up in September and October and the company saw strong growth in categories like home, toys, active and beauty.

For the holiday season, Kohl’s’ efforts are focused in particular on its assortment and omnichannel capabilities. The digital channel played an important role during the third quarter, growing sales by 25% and making up 32% of total sales. The pandemic caused a rapid shift towards digital and the company expects this trend to continue through the holiday season and beyond.

Kohl’s’ store fleet supported a large part of the digital sales growth by fulfilling around 40% of digital sales. For the holiday season, the company is looking to double the number of stores that can fulfill digital orders. Kohl’s also plans to build on its store and curbside pick-up services as well as utilize its ship from store service to support its digital sales.

From the Q3 transcript:

“Our omnichannel customer is six times more productive than a digital only customer and four times more productive than a store-only customer. We were pleased to see a number of our store only customers become omnichannel customers during this time and we expect this to continue as they enjoy the convenience of shopping digitally in addition to our stores. We are incredibly focused on evolving and elevating the customer experience across our store and digital assets.”

In terms of assortment, Kohl’s is planning on giving importance to Active, Home, Cozy and Comfort, and Toys. Active includes apparel and footwear, athleisure, accessories and outdoor. Amid the pandemic, there is an increasing focus on health and wellness and people are working out both indoors and outdoors. This has driven demand for active and athleisure apparel and footwear.

Active has doubled its penetration since 2013 and Kohl’s is looking to drive further growth in this space through various initiatives. The company will increase its space allotment in stores for Active by around 20%. Kohl’s is optimistic that it can drive sales growth based on the outperformance of its existing 160 Active expansion stores.

Also read: Kohl’s Corporation Q3 2020 Earnings Call Transcript

Kohl’s will roll out a new athleisure private brand called FLX in March 2021 and also build on the success of its Champion brand which grew 95% in the third quarter. The emphasis on more productive categories such as Active will help drive margin expansion as opposed to categories like dress apparel and fine jewelry which have lost traction.

Kohl’s sees vast opportunity in the beauty category and is looking to triple its sales in this category. In 2021, the company plans to expand with more brands in this category thus helping drive growth.

During the third quarter, total sales in Home rose 10% while digital sales grew 50%. The company saw solid demand in kitchen and living spaces with increased sales in cookware, food preparation, kitchen electrics, floor care and bedding. Toys saw double-digit growth during the third quarter.

Overall, Kohl’s believes that the current disruption in the retail industry has provided opportunity to grow market share and the company is working to take full advantage of this situation.

Click here to read the second part of this story on Target