Kohl’s shoppers can look for price cuts and other promotions in the coming months as the company seeks to rebound from a poor first quarter.
Reacting to the retailer’s worst showing in three years on comparable store sales – a critical measure of retailing performance – Kohl’s executives vowed Tuesday to lower prices to protect market share.
“We know our customers are driven by value, and so we’re going to make the necessary changes to pricing and promotion to help drive that,” Bruce Besanko, Kohl’s chief financial officer, told analysts on a conference call. “We’re not going to lose out, as a consequence of pricing, to competitors.”
But it may take an experienced eye to spot those bargains among Kohl’s widespread and all-but-constant array of promotions: Besanko said the coming adjustments to pricing would be “surgical.”
The moves follow a 2.9% drop in overall revenue in the first quarter and a 3.4% sales slump at stores open at least a year. The latter decline ended six straight quarters of same-store sales gains for Kohl’s and was the retailer’s worst performance since same-store sales fell by 3.9% in the first quarter of 2016.
Going out of business: Ascena Retail Group closing all of its nearly 650 Dressbarn stores
When are Payless stores closing?: It depends but some are staying open longer
Besanko said that while the results are disappointing, executives see them as “simply a speed bump.”
“We intend to go past it and regain the momentum as we move forward through the rest of the year,” he said.
On Tuesday, though, Kohl’s stock got hammered. Following the early-morning earnings announcement, shares dropped immediately and closed at $55.15, down 12.3%.
It was a sharp contrast to the gains the company posted a month ago as it announced it would accept returns of Amazon purchases at all Kohl’s stores nationwide – an expansion of the company’s partnership with the e-commerce giant.
But since that late-April surge, Kohl’s shares have been on a downward march, falling nearly 27%.
Amid the first-quarter sales decline, Kohl’s “was agile and acted appropriately by managing expenses while continuing to invest in future growth,” CEO Michelle Gass told analysts.
To drive that growth, the retailer is counting heavily on its much-watched partnership with Amazon. Following what appears to have been a successful pilot project dating to October 2017, Kohl’s in July will begin accepting returns of Amazon purchases at all 1,155 Kohl’s stores nationwide.
It’s an all-in bet that teaming with an online rival widely viewed as undercutting traditional retailers will boost traffic and sales at Kohl’s.
Happy returns: Kohl’s to accept Amazon returns at all stores beginning in July
Tariff impact: China tariffs could force ‘widespread store closures’ and put $40 billion in sales at risk
The Menomonee Falls-based chain has remained largely mum on the results of its 20-month experiment accepting Amazon returns at stores in Chicago and Los Angeles.
Gass reiterated past statements Tuesday that Kohl’s feels “really good” about the test results, and said stores accepting Amazon returns had seen “a pretty significant lift in traffic.”
Besides rolling out the returns service across its chain, Kohl’s will invest in added staff and logistics capacity to support the effort. The company also will increase the number of stores offering Amazon smart-home devices from about 200 to more than 600.
“The model works,” Gass said. “It works for us; it works for Amazon.”
For the three months ended May 4, Kohl’s revenue totaled $4.09 billion, down from $4.21 billion in the first quarter of 2018.
Also reporting quarterly results Tuesday was struggling department store chain J.C. Penney, where same-store sales dropped 5.5%. Macy’s said last week that its same-store sales rose 0.6%.
Discount retailers continue to fare better. TJX Companies, operators of T.J. Maxx and Marshalls, said Tuesday that same-store sales were up 5%. Last week, Walmart reported a gain of 3.4% at established U.S. stores.
Follow Rick Romell on Twitter at @RickRomell