How Kohl’s Lured Shoppers Back Into Its Stores & Posted Its Best Sales Ever

Kohl’s Corp. today reported fourth-quarter sales at the highest level in its history as well as its largest comp gain — of 6.3 percent — in nearly two decades.

The department store chain — which has seen both industrywide and company-specific challenges eat away at its store traffic in recent years — is finally reaping the rewards stemming from a series of initiatives rolled out over the past two years.

“The fourth-quarter sales results were driven by improvement in traffic, which is our No. 1 priority,” CEO Kevin Mansell told investors during a conference call this morning. “Traffic was positive both in-store and online, and in both cases, well above the prior year-to-date trend.”

The company posted total Q4 sales of $6.8 billion, a gain of 9 percent year over year and just above forecasts for sales of $6.7 billion. It also noted that its 6.3 percent gain in the period was driven by strong results during the combined November and December holiday season.

“On a category basis, footwear, men’s and home outperformed the total, but all categories were positive for the quarter, including the very important women’s apparel category,” Mansell said. (Footwear reported double-digit comp growth, home and men’s both saw a high single-digit comp increase.)

Profits during the period also nearly doubled to $468 million, or $2.81 per diluted share. On an adjusted basis, diluted earnings per share were $1.99, handily topping analyst estimates for diluted EPS of $1.77.

Amid sluggish brick-and-mortar trends, Kohl’s over the last two years has thrown significant investment behind e-commerce, upped the emphasis on its loyalty programs, unveiled plans to test small-format stores and ramped up its athletic offerings — adding Under Armour to the mix.

Mansell said today that much of those efforts are taking hold.

“We’re highly focused on creating the best-in-class omnichannel experience by leveraging our stores more fully,” Mansell said of the firm’s strategy for physical outposts. “Investments we’ve made in new point-of-commerce, new associate mobile applications are having a positive impact on productivity in our stores. Improved customer digital experience around things like … Price Verifier, Kohl’s Pay and Your Price are all improving the customer experience and improving conversion in-store.”

Kohl’s online sales grew 26 percent during the fourth quarter, driven primarily by traffic but also improved conversion.

For the full year, the company saw sales growth of 2.2 percent to $19.1 billion, with reported diluted EPS of $5.12, a gain of 65 percent over 2016. Adjusted diluted EPS advanced 15 percent year over year to $4.31.

“We’ve entered 2018 with a lot of momentum on the top line and in the effort to attract new customers to maintain that momentum going forward,” Mansell said. “We believe that our strategies around product, around personalization and around loyalty are the keys to continue our traffic and sales growth into this year … We’re innovating, testing and rolling out new concepts that will make the customer experience more seamless and easier than ever. The confidence in our ability to drive traffic more consistently has been reflected in our more positive guidance on the top line for 2018.”

The company predicts comparable sales growth of flat to up 2 percent, and revenues are expected to be plus or minus 1 percent in 2018. Diluted EPS are forecast in the range of $4.95 to $5.45.

While Kohl’s shares jumped on the heels of the release, those gains reversed in midday trading.

As of 12 p.m. ET, shares were down 6.5 percent to $61.77.

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