Kohl's (KSS) shares rose as much as 7% in early trading after the company beat Wall Street earnings expectations by 15 cents and raised its profit outlook.
In the second quarter, the retailer doubled down on inventory management and expenses, leading to a 9% year-over-year decline in inventory. CEO Tom Kingsbury told investors on a call that it plans to “remain committed to increasing inventory turns and managing inventory in the mid-single digits.”
CFO Jill Timm said this is all done in an effort to “be competitive during a very promotional holiday season.”
Kohl's expects operating margins to be in the range of 3.4% to 3.8% by the end of 2024, with adjusted earnings per share in the range of $1.75 to $2.25.
The company lowered its full-year sales growth forecast as a “difficult consumer environment” persists and Kohl's customers are “feeling the burden” of a higher cost of living, causing them to invest less in its products in the second quarter.
It is now forecasting that same-store sales will decline 3% to 5% in fiscal 2024, up from a previously expected 1% to 3% year-over-year decline.
Sephora at Kohl's continues to be a bright spot for the company. The business's total sales grew nearly 45% year-over-year in the second quarter, with sales growth in the low-teens.
In 2024, the company added a total of 140 locations, surpassing 1,000 Sephora shops inside Kohl's.
“We've seen a good crossover in terms of customers who shop at Sephora,” Kingsbury said, adding that “about 35% of Sephora baskets also carry another product from Kohl's.” Because the beauty store attracts younger shoppers, it plans to move the juniors section to the front of the store.