Kohl’s Athleisure Push Is Working as It Delivers Q3 Earnings and Sales Beat

Kohl’s Corp. beat profit and sales forecasts for the third quarter as it continues to expand its athletic and casual offerings, revamp its loyalty program and double down on digital.

For the three months ended Oct. 31, the chain logged a loss of $12 million, or 8 cents per share, compared with the prior year’s income of $123 million, or 78 cents per share. Adjusted earnings per share of a penny, however, were well ahead of analysts’ bets of a loss of 43 cents per share. Revenues declined 13.3% to $3.98 billion but topped market watchers’ predictions of $3.86 billion.

Although comps fell 13.3%, the department store noted positive growth in the athleisure, lounge and sleepwear categories. Over the past several months, Kohl’s has been investing heavily in activewear, outdoor and casual apparel, areas that have all been strong during the pandemic.

Last month, the retailer announced the launch of private-label offering FLX (pronounced “flex”), which features performance fabrics, functional details and inclusive sizes. It also put Cole Haan in its roster for spring ’21, following the addition of Toms Shoes and Lands’ End to its portfolio for fall.

“Our third-quarter results exceeded our expectations with significant sequential sales and profitability improvement. Digital sales growth remained strong, and our actions to improve our gross margin showed great progress,” CEO Michelle Gass explained in a statement. “We also further strengthened our financial position and fully repaid our revolver during the period, which underscores the solid cash flow generation of our business.”

The Menomonee Falls, Wis.-based retailer said it ended the quarter with $1.9 billion in cash and an operating cash flow of $910 million in the year to date.

Heading into the holidays, Kohl’s is more than doubling the number of stores carrying incremental inventory in order to fulfill digital orders. (It currently operates more than 1,100 locations in 49 states.) It also plans to emphasize the active, home and toys departments, as well as brands in its new “Cozy and Comfort” space, amid demand for more practical gifting this season.

What’s more, the company recently unveiled a new loyalty program dubbed Kohl’s Rewards, which gives customers 5% Kohl’s Cash a day on every purchase. The offering is a replacement to Yes2You Rewards — 30 million members were automatically transitioned into the new program.

“As we look ahead, we are incredibly focused on executing against our new strategic framework, which represents our greatest opportunity to drive long-term sales and profit growth and create shareholder value in the coming years,” said Gass.

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