With the acceptance of Amazon returns rolled out in its stores and a pipeline of digital initiatives ahead, Kohl’s reported its second-quarter earnings with a confident outlook for the balance of the year. The department store retailer also highlighted efforts such as the upcoming launch of its Curated by Kohl’s program and an expansion of its rewards pilot.
Kohl’s Chief Executive Officer Michelle Gass said in an earnings conference call on Tuesday (Aug. 20) that the Amazon returns program is a significant initiative and a “great example of our innovative spirit.” (As previously reported, the department store retailer will accept “eligible” Amazon items without a label or box.) The partnership with the eCommerce retailer, Gass noted in the call, reflects the collective strengths of both merchants.
Gass pointed out that Kohl’s has a robust nationwide footprint and best-in-class omnichannel capabilities. Amazon, on the other hand, has an expansive customer reach and world-class digital capabilities. She also noted that the effort aligns perfectly with the company’s top strategy of driving traffic. “The overarching goal of this program is to convert the traffic that comes into our stores into loyal Kohl’s shoppers over time,” Gass said.
The executive also noted that the company completed its nationwide rollout on July 8. And, while the program has only been in place for six weeks, she noted that the company is very encouraged by the initial results. Traffic coming into its locations is meeting expectations, Gass said, and is skewing toward off-peak times. She also pointed out that the company is seeing a mixture of existing customers and new, younger shoppers using the service.
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The company began supporting the program in mid-July with a robust marketing plan that encompassed digital, print and national broadcast television. Gass also noted that the company expects the Amazon returns program to make a positive contribution to operating income in 2019.
Curation and Rewards
Gass noted that an effort called Curated by Kohl’s will showcase “emerging” digitally native brands in approximately 50 Kohl’s locations and online beginning in October. The company will start by offering six brands and will rotate them to ensure a continuous flow of newness and discovery for both current and new customers. (It was previously reported that the retailer also plans to team with Facebook on brand curation starting next year.)
The executive noted that Kohl’s is in a unique position to support customers’ curiosity when it comes to new brands and interesting products by tapping into its store footprint, digital assets and large customer base. The platform also enables the company to find, test and gain important insights into emerging brands with “long-term growth potential,” Gass noted. (According to previous reports, selections could include products in categories such as apparel, home and accessories.)
Kohl’s also recently expanded its rewards pilot to five more markets (it now covers a total of 13 markets, covering roughly 175 stores). The company is pursuing a strategy of simplifying its loyalty assets under one umbrella with rewards anchored to Kohl’s Cash – “a customer favorite and a key differentiator of ours,” per Gass. She pointed out that the loyalty program has 30 million active members, and the company believes there is a sizable opportunity to enhance customer acquisition and retention.
The company also plans to test a new site redesign with a small subset in the fall, with the aim of improving the customer experience and driving even better conversion. The new site is said to feature enhanced imagery, navigation and filtering, while also encouraging more discovery and inspiration while keeping the company’s value messaging intact.
Kohl’s surpassed earnings estimates for the second quarter, but its net sales fell short of estimates. The department store retailer reported net sales of $4.17 billion and earnings of $1.55 per share compared to estimates of $4.2 billion and $1.53 per share.
With efforts such as Amazon returns and a curated selection of emerging brands, Kohl’s aims to bring customers into its stores as it looks toward the rest of the year.
Date: August 22, 2019