Kohl's Needs More Than an Amazon Partnership
Department store retailer Kohl's reported better than expected comp sales in its third quarter 2017, up 0.1%, while analysts had expected a decline of 0.7 percent, according to Thomson Reuters I/B/E/S. But the slight rise in comp sales, generated by improved traffic trends, was overshadowed by the fact net sales were largely flat at $4.33 billion.
The retailer estimates it lost $15 million in sales while more than 100 stores were closed due to hurricanes in the quarter.
"We saw strong results during the back-to-school season, achieving a low single-digit positive comp," said Kevin Mansell, Kohl's chairman, chief executive officer and president. "The middle of the quarter was soft as we experienced disruptions from the hurricanes and other unseasonal weather. The quarter closed with strong sales in the second half of October."
Kohl's saw pressure in IT expenses as it migrates its technology to the cloud and invested in digital and holiday capacity. Depreciation expense was $243 million for the quarter, up $11 million over last year’s third quarter, driven by higher IT depreciation.
So what is Kohl's doing to overcome this?
Kohl's began a partnership with Amazon in October that includes adding dedicated areas for Amazon smart home devices in Chicago and Los Angeles area Kohl's stores. The retailer has also begun accepting returns of certain Amazon purchases at 82 of its stores. While Mansell has not shared any updates on how the test are doing he did note the objectives are pretty simple.
"We believe both of these tests have the potential to drive incremental traffic to our stores, which as you know, is our number one priority."
On the e-commerce side of things, the retailer says improved experiences in its mobile applications increased digital conversion at a low double-digit rate and mobile accounted for 67% of traffic in the quarter. Kohl's continues to work on using data and analytics to drive marketing, digital and personalization efforts.
"In the quarter, we increased our level of personalization and key marketing events, as well as leveraged our new insight based pricing tools to deliver new promotional events that are resonating with our customers," said Mansell.
Kohl's also completed the rollout of Your Price in the quarter, which shows the personalized price of individual items based on the customer specific offers. After scanning any product with the Kohl's mobile app in store, shoppers can find "Your Price" by automatically applying any relevant discount to the scanned product.
Going forward, Kohl's will pilot a further evolution of its loyalty program in its second quarter of next year. Approximately 100 stores will participate and the retailer expects a companywide rollout for fiscal 2019.
"The objective of the pilot is to simplify the program, broaden the reach and provide even more rewards to users in a program that already is best-in-class," said Mansell. "With over 30 million unique customers utilizing at least one of the elements of our loyalty program, we believe this next evolution has great opportunity to drive a step change in traffic and sales."