Kohl’s (KSS) shares rose in early trading, climbing as much as 7%, after the company beat Wall Street’s profit expectations by 15 cents and raised its profit outlook.
The company doubled its inventory management and expenses in the second quarter, leading to a 9% decline in inventory from a year ago. Chief Executive Officer Tom Kingsbury told investors on a conference call that the company plans to “remain focused on improving inventory turns and maintaining inventory management in the mid-single digits.”
All of this is an effort to “stay competitive during the promotional holiday season,” Chief Financial Officer Jill Timm said.
Kohl’s expects operating margins of 3.4% to 3.8% and adjusted earnings per share of $1.75 to $2.25 by the end of 2024.
The company lowered its full-year sales growth outlook as a “challenging consumer environment” continued and Kohl’s customers felt the “burden” of rising living costs, leading them to add fewer items to their shopping carts in the second quarter.
The company now expects same-store sales in fiscal 2024 to decline 3-5% year-on-year, larger than the previously expected decline of 1-3%.
Kohl’s Sephora continues to be a bright spot for the company, as total sales for the business increased about 45% year over year in the second quarter, with sales growth in the low teens.
The company plans to add a total of 140 stores in 2024, bringing the number of Sephora stores at Kohl’s to more than 1,000.
“We’ve seen good crossover with customers shopping at Sephora,” Kingsbury said, adding that “about 35 percent of Sephora baskets also have other Kohl’s products in their baskets.” As the beauty retailer attracts younger shoppers, it plans to move its juniors section to the front of the store.
