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Kohl's (KSS) Gains on Focus on Home Unit & Strategic Priorities

Kohl’s Corporation KSS is making remarkable progress against each of its key priorities, including improving customer experience and expense management, among others. The company is benefiting from a growing home business. The specialty department stores retailer undertakes solid partnerships to fuel growth.

Let’s discuss this in detail.

Key Priorities Drive Growth

Kohl's is on track with its key priorities, including improving customer experience, simplifying value strategies, undertaking disciplined inventory and expenses management and solidifying the balance sheet. The company is committed to driving growth with its loyalty programs, including Kohl's Cash, Kohl's Rewards and private-label credit cards. In the second quarter of fiscal 2023, management launched a co-brand credit card, which gives consumers more ways to earn Kohl's Rewards. KSS is on track with managing costs, focusing on lowering the marketing spend ratio and bringing more extraordinary technology into its operations to enhance productivity.

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Zacks Investment Research

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Home Category Grows

The Zacks Rank #3 (Hold) company is on track with building its home business, which represents a solid growth opportunity. KSS aims to offer customers an expanded range of stylish homes and seasonal decorations at affordable prices. It has been actively engaged in enhancing and diversifying its home products lineup in the past year and is optimistic about the initial response to its home decor collection. The company improved its in-store and digital presentation, engaging in multi-channel marketing efforts like digital activations aimed at inspiring and engaging customers. Management expects to witness an increase in home sales on the back of rising awareness of the expanded assortment during 2024.

Strategic Partnerships

The company’s solid partnership with Sephora to create a new era of elevated Beauty at Kohl's is noteworthy and generating impressive results. In the fourth quarter of fiscal 2023, Sephora sales surged more than 70%, with comparable sales growth of almost 25%. Sephora is present at 910 Kohl’s stores. Management is on track to expand the number of locations, with Sephora opening nearly 140 smaller format shops in 2024.

Kohl’s recently partnered with the owner of the Babies “R” Us brand to expand its presence in the baby category. The partnership will bring baby gear, furniture and activities, among others, to Kohl’s. Management plans to open Babies R Us shops in almost 200 Kohl's stores by 2024-fall.

Wrapping Up

Kohl's has been witnessing pressure in its online business for a while. The trend continued in the fourth quarter of fiscal 2023, with digital sales (excluding the 53rd week) declining 16.5%. Concurrently, the company’s quarterly revenues came in at $5,956 million, down from the prior-year quarter’s level of $6,019 million. Nevertheless, focusing on the upsides mentioned above is likely to keep narrating Kohl’s growth story.

KSS’ shares have increased 30.5% in the past six months compared with the industry’s growth of 44.6%.

Top 3 Retail Picks

American Eagle Outfitters AEO, which operates as a specialty retailer, currently sports a Zacks Rank #1 (Strong Buy). AEO has a trailing four-quarter earnings surprise of 22.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for American Eagle’s current fiscal-year earnings and sales indicates growth of 3.3% and 12.5% from the year-ago reported number.

Abercrombie & Fitch ANF, a specialty retailer, currently sports a Zacks Rank #1. ANF has a trailing four-quarter earnings surprise of around 715.6%, on average.

The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and earnings suggests a decline of 5.6% and 19.1%, respectively, from the year-ago reported numbers.

Kroger KR, which operates as a food and drug retailer, currently carries a Zacks Rank #2 (Buy). Kroger has a trailing four-quarter earnings surprise of 8.5%, on average.

The Zacks Consensus Estimate for Kroger's current fiscal-year earnings per share has increased by 1.6% to $4.43 in the past 30 days.


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