Kohl’s (KSS) shares are moving higher in early trading, jumping by as much as 7% after the company beat Wall Street’s earnings expectations by $0.15 per share and raised its profit outlook.
In Q2, the retailer doubled down on inventory management and expenses, leading to a 9% year-over-year decline in inventory. It plans to stay “committed to increasing inventory turns and managing inventory down mid-single digits,” CEO Tom Kingsbury told investors on a call.
All this in an effort to be “competitive during a very promotional holiday season,” CFO Jill Timm said.
Kohl’s expects to end 2024 with an operating margin between 3.4% and 3.8% alongside adjusted earnings per share in the range of $1.75 to $2.25.
The company did lower its full-year sales growth guidance as a “difficult consumer environment” persists and Kohl’s customers feel “the burden” of a higher cost of living, causing them to put less in their basket.
It now expects same-store sales to fall between 3% and 5% for fiscal year 2024, more than the previously expected year-over-year decline of 1% to 3%.
Sephora at Kohl’s continues to be a bright spot for the company. Total sales for the business jumped nearly 45% in Q2 year over year, with sales growth in the low teens.
In 2024, the company added 140 total locations, surpassing 1,000 Sephora shops inside Kohl’s.
“We’ve seen a nice crossover in terms of customers that are shopping at Sephora,” Kingsbury said, adding that “around 35% of the Sephora baskets have another product from Kohl’s in their basket.” As the beauty store attracts younger shoppers, it plans to move the junior section to the front of the store.