Kohl’s Corp., citing improvements in stores and merchandise, turned profitable in the fourth quarter despite the challenging climate for sales.
Net income for the fourth quarter ended Feb. 3 was $186 million, or $1.67 diluted share, compared to a net loss of $273 million, or $2.49 a share, in the prior year.
Operating income was $299 million compared to a $302 million loss in the prior year. As a percentage of total revenue, operating income was 5 percent, an increase of 1,005 basis points year-over-year.
Net sales decreased 1.1 percent year-over-year, to $5.7 billion. The fourth quarter included net sales of about $164 million from the 14th week. Comparable sales decreased 4.3 percent.
To help turn around the sales performance and seek younger families, Kohl’s revealed a rollout of Babies “R” Us shops beginning in August through a partnership with WHP Global, the owner of the Babies “R” Us brand. The plan is to open Babies “R” Us shops in about 200 Kohl’s stores this fall selling baby gear, furniture and other products. Babies “R” Us products will also be on Kohls.com and the Kohl’s registry.
Tom Kingsbury, Kohl’s chief executive officer, said in a statement Tuesday that 2023 represented “an important year for Kohl’s. We enhanced our store experience, expanded our partnership with Sephora, and invested in under-penetrated categories. We also simplified our value strategies and implemented new inventory management processes. The early success of our strategies is evident. Our store business had its best comparable sales performance since 2010, Sephora at Kohl’s continued to drive meaningful beauty sales growth, and we managed inventory down 10 percent at year end. I want to thank the broader Kohl’s team for driving significant change to reposition the company for future growth.
“Looking ahead, we are incredibly focused on delivering comparable sales growth in 2024,” Kingsbury added. “Our strategic initiatives are positioned to build momentum and contribute more meaningfully, and we will partner with Babies ‘R’ Us to meaningfully expand our presence in the baby gear category which represents a compelling white space opportunity for Kohl’s. Through our collective efforts Kohl’s is becoming more relevant to customers, which strengthens our conviction in our longer-term opportunity.”
For 2024, the company forecasts:
- Net sales ranging from a decrease of 1 percent to an increase of 1 percent.
- Comparable sales ranging from flat to an increase of 2 percent.
- Operating margin ranging from 3.6 percent to 4.1 percent.
- Diluted earnings per share of $2.10 to $2.70, excluding any non-recurring charges.
The Babies “R” Us shops inside Kohl’s will range from 750 to 2,500 square feet and sell baby gear, activity, bath, furniture, feeding, and safety products. The space will be adjacent to Kohl’s existing assortment of baby apparel which includes Graco, Chicco, Boppy, Skip Hop, Delta Children, Fisher-Price, and Carter’s.
Aside from Babies “R” Us, WHP owns Toys “R” Us, Anne Klein, Joseph Abboud, Joe’s Jeans, Bonobos, Isaac Mizrahi, G-Star Raw, and Lotto. Last month WHP signed a definitive agreement in partnership with Guess? Inc. to acquire Rag & Bone. WHP also has a majority interest in Express, which has been losing money, seeking government support, and has attempted to quell speculation of a potential bankruptcy.
For all of 2023, Kohl’s reported that net income was $317 million, or $2.85 per diluted share. This compares to net loss of $19 million, or $0.15 per diluted share in the prior year.
Operating income was $717 million compared to $246 million in the prior year. As a percentage of total revenue, operating income was 4.1 percent, an increase of 274 basis points year-over-year.
Net sales decreased 3.4 percent year-over-year, to $16.6 billion. The full year included net sales of about $164 million from the 53rd week. Comparable sales decreased 4.7 percent.
Gross margin as a percentage of net sales was 36.7 percent, an increase of 347 basis points.
Selling, general & administrative (SG&A) expenses decreased 1.3 percent year-over-year, to $5.5 billion. As a percentage of total revenue, SG&A expenses were 31.5 percent, an increase of 67 basis points year-over-year.
