Menomonee Falls, WI — Kohl’s is looking to boost its jewelry sales after reducing jewelry sections to make room for Sephora stores-within-stores. This move comes as part of Kohl’s strategy to rebound from disappointing first-quarter earnings.
When Kohl’s Corp. introduced Sephora into its stores several years ago, it reduced the space for jewelry, including luxury watches, rings, necklaces, earrings, and other accessories. Now, nearly every Kohl’s store has a Sephora, leaving limited space for jewelry. For instance, the new downtown Milwaukee store has less than five two-sided racks for items like earrings, necklaces, and bracelets.
During a call with analysts on May 30 discussing the company’s first-quarter earnings, Kohl’s executives outlined plans to leverage Sephora’s popularity to boost sales in nearby departments, including jewelry. The earnings report showed a 5.3% year-over-year decline in net sales to $3.2 billion, with comparable sales down 4.4%. Kohl’s posted a $27 million loss for the quarter, compared to a $14 million profit in the first quarter of 2023.
“Over the past few years, as we made space for Sephora in our stores, we did not do a good job of retaining our jewelry sales, which had been on a consistent sales decline,” Kohl’s CEO Tom Kingsbury said on the earnings call. He sees an opportunity to grow in the jewelry sector.
After Michelle Gass stepped down as CEO in late 2022, Kingsbury took over, first as interim and then as full CEO. Under his leadership, Kohl’s made $317 million in 2023, reversing a $19 million loss from the previous fiscal year. The company focused on reducing inventory and increasing gifting during this period.
However, significant markdowns to clear inventory in the fourth quarter of 2022 created financial challenges, which were evident in the first-quarter earnings call. “The clearance headwind really hurt us,” Kingsbury told analysts. “We took a ton of markdowns in the fourth quarter of ‘22 to clean all the inventory up, so obviously that was a huge headwind for us in the first quarter.”
To build profits, Kohl’s plans to increase sales of non-clothing items. In the first quarter, the company saw a 30% increase in gifting sales and a 60% increase in impulse sales, such as items around the checkout area. Re-emphasizing jewelry aligns with this strategy.
“We are currently working to re-establish our presence, which will include expanding our in-store assortment and improving the in-store positioning by placing it near Sephora,” Kingsbury said, adding that these changes should be in place for the holiday season. Kohl’s is also enhancing its apparel selection, moving juniors next to Sephora, offering more men’s clothing items, and expanding the kids’ section.
Sephora remains a crucial part of Kohl’s strategy to attract new customers. Kingsbury announced plans to open 140 more Sephora at Kohl’s stores, bringing the total to around 1,050 out of nearly 1,200 Kohl’s stores. In 2023, Sephora at Kohl’s stores generated over $1.4 billion in sales, with expectations to exceed $2 billion by 2025.
“Sephora continues to be an important driver of new customer acquisition,” Kingsbury said. “We are also continuing to attract a younger, more diverse customer who shops more frequently as we’ve expanded Sephora across our store base.”
Kohl’s aims to capitalize on Sephora’s success to boost overall sales, particularly in the underperforming jewelry sector, as it strives to recover from recent financial setbacks.
Related topics:
