Even with digital sales growth and the Amazon returns program in stores across the country, Kohl’s Corporation posted third-quarter results that fell short of analysts’ estimates.
CEO Michelle Gass said in a call with analysts that the firm experienced softness in September as it grappled with “an increasingly competitive environment and unseasonably warm weather.”
The retailer enhanced its marketing offers and invested in pricing. Gass noted that its “decisive actions were successful” and allowed for “strong sales performance in October,” although she noted the quarter didn’t meet the company’s expectations.
In terms of digital, Gass said the company is pleased with the momentum that it sees. Digital sales rose at a mid-teens rate in the third quarter.
The executive noted that “mobile continues to be the primary driver of digital growth, with particularly strong performance from the Kohl’s app.”
Gass also pointed out that the Kohl’s app grew significantly quicker than digital overall during Q3 “with nearly double the traffic growth and nearly triple the sales growth as our loyal customers have increased their usage.”
When it comes to Amazon returns, Gass noted the company finished the nationwide rollout of the program late in Q2.
“With the expansion of the program, consumer research indicates that customers are very satisfied with the service,” Gass said. “They find it simple and easy to use, and they intend to use it again.”
The executive noted that the program is driving incremental traffic to its locations, and the company is “particularly encouraged by the disproportionate amount of new customers.” She also pointed out that this holiday season will be the first with Amazon returns in stores across the country.
For merchandise, Gass noted that active remains as a key growth driver for its business. Active sales rose 7 percent compared to the prior year. And active apparel sales rose at a “high-single digit rate,” Gass said, driven by a formidable performance from Under Armour, Adidas and Nike in addition to other brands. The company also grew the number of locations with more active space from 30 to roughly 160. It also brought on an additional 100 Adidas shop-in-shops to increase the penetration from 75 to 175 doors.
Kohl’s Corporation reported revenues of $4.36 billion and adjusted earnings per share of 74 cents compared to analysts’ estimates of $4.4 billion and 86 cents. The department store retailer now expects to earn an adjusted $4.75 to $4.95 per share for fiscal year 2019. Analysts had been seeking $5.19 per share, and the prior range was $5.15 to $5.45.
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