Kohl’s sales fell 23% in its recently ended second quarter, but the retailer’s chief executive sees many opportunities in the even bigger problems faced by many of its rivals.
The low-priced department store chain posted better-than-expected results for the quarter on Tuesday, when total store hours decreased 25% due to COVID-19-related closures in May. But Kohl’s has benefited from its historically strong balance sheet (its debt is still investment grade) that allows it to weather the intense storm that has brought down or diminished its rivals.
According to a report from S&P Global Intelligence on Monday, there have been 44 retail bankruptcies so far in 2020, which already matches last year’s count. They include J.C. Penney and clothing chains like Ann Taylor, who compete with Kohl’s. Another Kohl’s rival, Macy’s, falters and closes dozens of stores.
And all of this debris gives Kohl’s a chance to rebuild its business while outperforming rivals, its CEO believes.
“COVID has created a lot of devastation,” Kohl CEO Michelle Gass told Fortune in a media conference call.
Only a few percent of Kohl’s stores are in shopping centers, and most are in shopping centers, where Ulta Beauty, T. J. Companies like that. Maxx and Target Functions. Hence Messi and J.C. Penny’s are only indirect contestants, at least physically. But Gus says that Kohl’s has the technology and expertise to market to potential customers in the store who have lost that store.
“When a local store closes, whether it’s a bankrupt chain or a single store, we have the opportunity to target customers in that local area”, says Gus. . An important component to attract new customers to Kohl’s stores is its two-year partnership with Amazon, for which it handles returns in Kohl’s stores.
Kohl’s mall neighbors, particularly Ulta and Target, are formidable rivals with popular bargains. But Gass is betting that Kohl’s will attract buyers with adjustments to its own assortments.
While Target is well known for its store brands, particularly in apparel, Kohl’s has opted for partnerships with national brands such as Under Armor and Nike, which are not at Target, and new exclusive partnerships with brands such as Toms Shoes and Lands’ End.
And he also hopes that Kohl’s neat and orderly stores, a longtime advantage over Penney and Macy’s, will attract customers from those chains. Kohl’s has reduced the amount of inventory it carries in stores and simplified display to enhance shoppers’ sense of security in its stores.
“We all believe that there will be a long queue for people to worry about their health and safety well beyond the acute part of COVID,” says Gass.
At the same time, quarterly results from other retailers showed Kohl’s vulnerability as a heavy clothing chain during the COVID crisis. Kohl’s posted a second-quarter loss of 25 cents a share when excluding some items, though better than the estimated loss of 70 cents, and sales fell to $ 3.2 billion.
In contrast, Walmart and Home Depot reported highly successful quarterly results Tuesday, while Target is expected to do the same on Wednesday. Gass herself recognized the difficulties that are likely to last.
