Kohl’s reported a soft comparable sales decrease of -5.1%. CEO Tom Kingsbury said:
“During the second quarter, our customers exhibited more discretion in their spending, which pressured our sales even as customers transacted more frequently...Inflation and high interest rates continued to pressure spending, especially among our middle-income consumers. We are seeing the clearest evidence of this in the performance of our core apparel and footwear offering, which experienced broad softness in the quarter. To better navigate this environment, we are taking a number of actions to ensure that our customers recognize all of the enhancements we have made across product value and experienced during the past year. We are evolving our marketing message to increase consideration of Kohl's as a leading destination for value for the entire family. Our advertising has already begun to include messaging around lower price points across our assortment.”
This matches up with our outlook for consumer spending this year – market share is going to where prices are absolutely lower than last year and where the value message is loudly broadcast. See our stories on the recent results from Costco, Walmart, Target, Amazon, and off-price.
Given that traffic in the quarter was only down -0.4% and comparable transactions increased, basket size was deeply negative–a curious dynamic given Kingsbury’s call-out on high- versus middle-income consumers. Revenue continues to be driven by Sephora at Kohl’s, with beauty sales up +45% driven by more remodels and a low-teens increase in Sephora comps (which is down from +20% in Q1 2024). (See our prior report on the beauty category here). Kohl’s noted solid performance for Mother’s Day, Father’s Day, and the Fourth of July; however, as shown in the chart below, the shape of the summer has substantially changed since pre-pandemic with these holidays sparking a lower lift and this year’s back-to-school period, substantially less so.
