Kohl’s to open 100 small-format stores, expand Sephora shops

NEW YORK (AP) — Department store chain Kohl’s expects to increase sales by a low-single-digit percentage annually, with plans to open 100 new small-format stores in the next four years and to expand its partnership with beauty retailer Sephora to be a $2 billion business, among other moves.

Kohl’s announced its long-term goals ahead of the company’s annual investor meeting as it faces increasing pressure from activist investors.

“We have a playbook of initiatives that we never had before,” Kohl’s CEO Michelle Gass told investors on Monday.

As part of its plans to spearhead sales growth, Kohl’s said it is on track to roll out Sephora shops at 850 stores by next year. Beginning last fall, the department store chain started replacing all of its cosmetic areas at Kohl’s with Sephora branded shops. Kohl’s executives said that 25% of its Sephora customers are new, and those shoppers are picking up other items across the aisles.

Kohl’s said it’s rolling out self-serve buy online, pick up in store areas to all stores this year, and is continuing to test self-serve returns and check-out sections. Gass told The Associated Press during a separate interview that the moves to automate these services were in response to customer demand but they will also help to alleviate rising labor costs. She said that Kohl’s will be able to reinvest those savings back into the stores.

Kohl’s, based Menomonee Falls, Wisconsin, also said that it continues to acquire millions of new customers with its partnership with online behemoth Amazon.com, which allows shoppers to return Amazon orders at its stores.

Kohl’s plans to build its online business to reach $8 billion in sales, up from the current $6 billion.

As for the smaller stores, Kohl’s said they run about 35,000 square feet, on average. One of the first is being tested in Seattle area. That compares to the typical Kohl’s store, which averages around 80,000 square feet.

Kohl’s forecasts per-share earnings growth of a mid-to-high single-digit percentage; and operating cash flow of over $5.5 billion, with roughly $2.5 billion of free cash flow between 2022 to 2024.

Kohl’s said in early February that recent offers to purchase the department store chain undervalue its business and said it’s adopting a shareholder rights plan to head off any hostile takeovers.

The shareholder rights plan, which is known as a “poison pill,” is set to expire on Feb. 2, 2023.

Shares slipped 13%, or $7.68 per share, to $51.09 in afternoon trading Monday.


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