Kohl's on Tuesday reported that second quarter revenue slipped 3.1% to $4.4 billion, a result that just beat Wall Street expectations and sent shares up in premarket trading.
Store comps fell 2.9% year over year, but grew from the previous quarter and improved throughout the second quarter, reaching 1% growth in the final six weeks, according to a company press release. That has continued into August, CEO Michelle Gass said in a statement.
Net income fell more precipitously, dropping 17% to $241 million, as gross margin declined 72 basis points to 38.8% from 39.5% in the year-ago quarter.
The back-to-school season has been a boon to Kohl's as the summer has receded, according to Gass. But the discount department store's partnership with Amazon, which entails taking returns for the e-commerce giant's customers in all of its stores, continues to boost traffic, as hoped, she also said.
The retailer isn't relying entirely on either for future growth. Earlier this month, for example, Kohl's announced "Curated by Kohl's," a selection of products from emerging brands to be sold online and in more than 50 Kohl's stores beginning in mid-October. "We are confident that our upcoming brand launches, program expansions, and increased traffic from the Amazon returns program will incrementally contribute to our performance during the balance of the year and beyond," Gass said.
How well placed is her confidence? As consumer sentiment has waned somewhat this year, Kohl's strength has, too, according to GlobalData Retail Managing Director Neil Saunders. The retailer is lapping tough year-ago results, but GlobalData analysis shows that it's also suffering because confidence among its customers has dropped more than average. Margins were hit because rivals were also slashing prices, making competition fierce in the period, Saunders also said.
But the retailer is also doing a lot of things right, rendering many of its challenges mere "temporary bumps in the road" and its prospects brighter than many department store rivals, he said. "In our view, Kohl's does not share the desperation of other department stores and has several things working in its favor," he said in emailed comments.
Its Amazon partnership isn't just driving traffic, but bringing in younger customers, for one thing, according to GlobalData Retail. Incoming new merchandise is another.
"Getting customers into [the] store is half the battle, but the other half is ensuring that they engage and buy once they are there. On that front, Kohl's has a lot of new brand launches — both national and own-label — which should deliver over the next half of the year," Saunders said, citing a Nine West partnership in the fall and a Jason Wu holiday capsule collection.