Kohl’s rolled out fall and harvest goods in July to pull forward sales.
Summary:
- Kohl’s home sales up 1.0% led by decor and small electrics
- Online marketplace sales grew 88%, plans to double vendors
- Marketplace will more than double vendors and skus
- Tariff refunds boosted gross margin by 305 basis points
- Babies R Us shops coming to more stores this fall
Menomonee Falls, Wis. – Kohl’s home department turned in the strongest performance during the second quarter, beating overall company results with positive year-over sales.
Total company net sales were down 0.9% to $3.3 billion. Comp sales were also down 0.9%.
Home led the field with sales up 1.0%, led by home decor and small electrics.
The home decor area benefitted from expanded product choices, with particular strength in Americana themes. Small electrics – which had been pared down in last year’s Q2 because of China tariffs – bounced back with newness in key brands such as Shark Ninja, Kitchen Aid and Green Pan.
Bedding and bath were flat, with strength coming from Kohl’s proprietary Big One and Miryana brands. Tabletop also performed well, executives said during the company’s Q2 call with investors this morning.
Kohl’s total comp was impacted by slight declines in both average transactions and baskets. However, those metrics improved over Q1, with home, kids and juniors leading the way.
Other takeaways from the investor call:
Marketplace: Sales from Kohl’s online marketplace were up 88%. Although still a small part piece of the business, the company plans to more than double vendors and product count. If marketplace results had been added to the top-line tally for Q2, total sales and comp would have been down 0.2% each, according to CFO Jill Timm.
Baby bump: Kohl’s rolled out Babies R Us shops in roughly 200 stores in fall 2024, but executives haven’t said much about them since. Today, the company said it will add the shops to another 60 stores by the end of the year.
Private label: Proprietary brands delivered 3% comps sales growth. Kohl’s continues to enhance inventory depth and assortment to give shoppers more opening price points to choose from. Brands that have particular resonance include The Big One, Tek Gear and Sonoma.
“We’re operating in really uncertain times, and we have a lot of pressure on our customer from a macro perspective,” said Timm.
During the second quarter, Kohl’s received roughly $150 million in IEEPA tariff refunds and flowed approximately $100 million through to grow margin. As a result, gross margin as a percentage of net sales rose 305 basis points to 43.0%.
Net income declined 1.3% to $151 million, or $1.28 per diluted share.
With the first half of the year squared away, Kohl’s raised its guidance today, which includes the benefit of tariff refunds. For the full fiscal year the company now expects the following:
Net and comp sales: Now expected to range from a decrease of 1.5% to flat, improving the low end from the previous forecast of a 2% drop
Adjusted operating margin: Lifted to a range of 3.5% to 4.0%, up from the earlier estimate of 2.8% to 3.4%.
Adjusted EPS: Raised to a range of $1.80 to $2.40 per share, up from the prior range of $1.00 to $1.60.
