For Kohl’s Corp., stores have to work harder than they do today, company executives said during a Q2 investor call where they revealed online sales grew in the mid-teens but overall sales fell 2.1% to $4.18 billion from $4.27 billion.
“We all feel like stores are a really important part of our future and we just have to make them work harder for us with customers,” chairman and CEO Kevin Mansell said Thursday.
Increasingly, stores play a greater role in online sales. During the quarter 23% of goods ordered online—accounting for 21% of web sales—were either shipped from a Kohl’s store to the customer, or the customer came to a Kohl’s store to pick up the order. The retail chain also says goods shipped from a Kohl’s store arrive at the customer’s doorstep in less than two days about 90% of the time, putting it in line with the shipping times offered by Amazon.com Inc. with its Prime two-day delivery program. “The ship-from-store option for us makes (us) competitive with Amazon Prime,” said Wesley McDonald, Kohl’s chief financial officer. Kohl’s is No. 19 in the Internet Retailer 2016 Top 500 Guide; Amazon is No. 1.
Kohl’s rolled out buy online, pickup in store capabilities to all its stores last year, and earlier this year said customers who come to a store to get their online order often buy additional goods on that visit, typically to the tune of 25% of the value of their online order.
Kohl’s also made progress in closing underperforming stores during the quarter. As of July 30 it operated 1,150 Kohl’s stores accounting for 82.7 million square feet of selling space. Six months ago, its store count was 1,164 stores and 83.8 million square feet of selling space, a reduction of 1.1 million square feet, or 1.3%.
Most of Kohl’s stores are 88,000 square feet, and about 178 are 55,000-68,000 square feet. Kohl’s during the quarter, however, opened seven smaller format stores—each around 35,000 square feet—as part of a test.
“We’re piloting these much smaller stores as perhaps replacements so we can continue to have points of distribution, but they’re less square footage,” Mansell said on the call, according to a transcript from SeekingAlpha. “And then we’re trying to utilize them as points of distribution through BOPIS [buy online, pick up in store] and ship-from-store strategies.”
The smaller store model is one Kohl’s intends to develop. “As leases come up, I think it’ll be smarter for us to relocate into a smaller store the next five years,” McDonald said. “Distribution points, as digital becomes a bigger part of everybody’s business, is important.”
For the three months ended July 30, Kohl’s reported:
- Net revenue of $4.18 billion, down 2.1% from $4.27 billion last year.
- A comparable-store sales decline of 1.8%, compared to a 0.1% gain.
- Net income of $140 million, up from $130 million.
For the first six months, Kohl’s reported:
- Net revenue of $8.15 billion, down 2.9% from $8.39 billion last year.
- A comparable-store sales decline of 2.8%, compared to a 0.8% gain.
- Net income of $157 million, down from $257 million.