Pressure on sales
Kohl’s Corporation’s (KSS) sales growth has been sluggish over the past few years. Aside from macro factors such as lower-than-expected consumer discretionary spending, the company has been impacted by the rapid rise of online retailers and the intense price competition from off-price retailers.
Trend in same-store sales
Same-store sales is an important metric for retailers. It measures the change in sales of the existing stores of a retailer over a certain period of time, excluding the impact of store openings and closures. In fiscal 2014, which ended January 31, 2015, Kohl’s same-store sales declined by just 0.3%, compared with a decline of 1.2% in fiscal 2013. Much of the improvement in the fiscal 2014 same-store sales compared with the previous year’s could be attributed to the company’s decision to refocus on the penetration of national brands.
Competition from other retailers
Kohl’s (KSS) also underperformed off-price retailers The TJX Companies (TJX) and Ross Stores (ROST), which posted same-store sales growth of 2% and 3%, respectively, in fiscal 2014. Together, Kohl’s, The TJX Companies, and Ross Stores account for 0.4% of the portfolio holdings of the iShares Russell 3000 ETF (IWV).
These off-price retailers have been quite consistent in their performance and continue to attract consumers with deep discounts on merchandise. Their competitive advantage lies in their lean operating structures, strong supplier relations, and efficient inventory management. To know more about The TJX Companies and Ross Stores, read the series TJX Companies: A Tour of the Retail Powerhouse and Ross Stores: The Must-Know Growth Story of an Off-Price Retailer.
Aside from facing competition from off-price retailers on low price points, Kohl’s and its department store peers were also impacted by the upsurge of online retailers such as Amazon.com (AMZN). Through its Greatness Agenda strategy, Kohl’s has made efforts to improve its online sales and increase consumer traffic through an attractive merchandise assortment.
We’ll discuss this strategy in Parts 5 and 6 of this series. Now let’s look at Kohl’s current merchandise and focal points.