Mobile web and the Kohl's app continued to be the primary drivers of growth for Kohl’s—together, they accounted for 75% of traffic and more than half of its online sales.

Kohl’s Corp. had better-than-expected sales for its fiscal fourth quarter and year ended Feb. 1. Kohl’s beat analysts’ Q4 projections, even though its total revenue for the quarter was flat, rising 0.1% to $6.832 billion compared with $6.82 billion in the year-ago period. For its fiscal year 2019, Kohl’s revenue reached $19.97 billion, a decrease of 1.3% compared with $20.23 billion in 2018.

Kohl’s online sales were up “double digits” in Q4, and ecommerce represented 25% of all sales in Q4, the retailer said. It did not break out exact ecommerce numbers or share full-year online sales data. In Q4 2018, the retailer also reported a double-digit increase in online sales.

Mobile web and the Kohl’s app continued to be the primary drivers of growth for Kohl’s—together, they accounted for 75% of traffic and more than half of its digital sales, said CEO Michelle Gass on an earnings call transcribed by Seeking Alpha. The retailer also had a “record number of active app users,” nearing 16 million, Gass said. In Q4 2018, mobile represented 70% of digital traffic and more than half of digital sales, Gass said.

New customer acquisition, in the double-digit range, helped drive its fourth quarter’s results, Gass said. Still, the full-year results did not meet the company’s expectations, she said.

“While 2019 was a year in which our financial results did not meet our expectations, it was also a year of innovation and investment that further strengthened Kohl’s differentiation in the market,” Gass said. “We are encouraged by the acceleration of traffic and new customer acquisition in our stores and online driven by the unprecedented level of new brands and partnerships we launched during the year.”

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Kohl’s, No. 26 in the 2019 Digital Commerce 360 Top 1000, did not include any impact of the new coronavirus in its guidance for the current year. While it has not seen an impact on customer traffic, Kohl’s is monitoring the situation and working closely with vendors to manage its supply chain, Gass said.

Holidays and Amazon returns

Kohl’s saw an increase in store traffic during the holidays, which the retailer credits, in part, to its Amazon Returns program, in which the retailer accepts returns for some Amazon products at all of its stores.

“We’ve seen sequential improvement and traffic in our stores following the nationwide rollout,” Gass said.

Buy online pick up in store also is a top driver of online and store traffic, Gass noted. “We love BOPIS because, number one, it gets our customers in the store,” she said. “And then secondly, it has a nice benefit to cost of shipping.”

The retailer’s BOPIS and buy online ship-to-store programs grew year-over year, but it did not reveal exact figures. Kohl’s plans to offer incentives for consumers to use BOPIS to boost shopper use, Gass said.

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“After a lackluster holiday season, the stage seemed to be set for a disappointing Q4 for Kohl’s,” says Kelly Lynch, retail solutions manager at analytics vendor ActiveViam. “However, thanks to the brand’s foresight and willingness to experiment with new strategies such as [its returns] integration with Amazon—which seems to have buoyed the company following the holidays thanks to a ton of Amazon returns—Kohl’s has been able to keep pace with other competitors that also posted a positive Q4.”

Investments in stores and online

About two weeks ago, Kohl’s added personalization features to its website, along with better filtering capabilities and search, Gass said on the call.

Personalization is a focus for Kohl’s as it goes into 2020, but it has been a several-year journey, Gass said, thanks to the amount of data and analytics that it has across its digital channels. It already implemented personalization in its ecommerce platform, email marketing and social media marketing. Thanks to these efforts, Kohl’s is already seeing higher conversion rates in stores and online, Gass said.

“So [personalization] will be a very big focus as we now convert these new customers,” she said. “It grew our overall customer base, and our customer retention is stable. And that’s a direct result of these personalization efforts. And then on loyalty, we’ve been testing and piloting the next-generation loyalty program for some time now.”

For its stores, Kohl’s plans to invest in modernizing its stores via new brand launches, merchandising and specific store refreshes, Gass said. For example, it plans to expand its Outfit Bar store experience to 800 stores in the fall after it had a successful pilot in 50 stores in 2019. The Outfit Bar is a curated selection of outfits put together by stylist Christine Andrew.

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March 16 is Kohl’s’ Investor Day, and the retailer plans to share more 2020 plans, such as its new brand portfolio and its new loyalty program plans.

For the fourth quarter ended Feb. 1, Kohl’s reported:

  • Net income shrank 2.6% to $265 million, down from $272 million.
  • Operating income was down 9.9% to $401 million from $441 million.

For the fiscal year ended Feb. 1, Kohl’s reported:

  • Net income shrank 15.9% to $691 million, down from $801 million.
  • Operating income was down 23.8% to $1.10 billion from $1.35 billion.
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