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Here's What Kohl's Is Doing to Drive Sales

Daniel B. Kline, The Motley Fool

Kohl's (NYSE: KSS) saw comparable-store sales drop by 2.9% in its second quarter. That's a disappointing drop, but CEO Michelle Gass tried to spin the news in a positive way in her remarks during the Q2 earnings call with investors.

"We are pleased to report that our business strengthened as we progressed through the second quarter," she said. "Comparable sales were better than the first quarter and improved during the period, turning positive during the last six weeks of the second quarter with a 1% growth. This positive trend has continued into August, driven by a successful start to the back-to-school season."

That's an upbeat way to sell investors on a lousy quarter, but it's also a sign that the company may be turning a corner. It has been, and will continue to be, a bumpy road for the retailer, but Gass has been making a lot of changes that may lead sales higher.

An Amazon store-within-s-store in a Kohl's.

Kohl's has Amazon kiosks in some of its stores and now takes returns for the online retailer. Image source: Kohl's.

What is Kohl's doing?

Gass touched on some of the company's efforts to drive sales in her opening remarks. She noted that digital sales have accelerated and the chain has positive momentum in its Active apparel category, while saying that apparel sales comps were positive in June and July.

"We're off to a good start with the back-to-school season and 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," she said.

Gass has high hopes for the company's deal with Amazon, which allows consumers to use Kohl's stores to return items to the digital retailer. The retailer completed its rollout of that program on July 8.

"Importantly, it perfectly aligns with our top strategy of driving traffic," she said of the partnership. "The overarching goal of this program is to convert the traffic that comes into our stores into loyal Kohl's shoppers over time...Traffic coming into our stores is meeting our expectations and skewing toward off-peak times."

Kohl's also has a number of new brands planned, including a partnership between country music star Brett Young, Levi's, and Kohl's. The chain is also partnering with Nine West for apparel and footwear.

"The launch of Nine West footwear will be our largest ever in the dress casual category and will position Kohl's with the largest ownership and footprint of the Nine West brand in the market," Gass said. "We're also excited about the significant opportunity we have in introducing the Nine West brand into women's apparel. Designed in-house, our Nine West collection will include an expanded wear-to-work offering and feature an elevated esthetic and a more contemporary look, which we believe will attract new millennial customers into Kohl's as well as engage our already loyal shoppers."

Better times coming?

While these are all potentially positive developments, Gass also acknowledged that tariffs could put pricing pressure on apparel and footwear. Those are two key categories the company has been revamping as part of its growth strategy. She attempted to address how the company would handle increased costs due to tariffs.

"We know that our customers are driven by our value proposition, so we will ensure that our customers continue to receive the value they expect from Kohl's," she said. "We've been executing against a sourcing diversification strategy for quite some time, and this year, our team has been working closely with our vendors to ensure that we are prepared for any potential tariff escalation."

Kohl's appears to be making smart moves to drive traffic and grow sales. Its turnaround, however, remains tenuous, and tariffs or a dip in the economy could set its plans back.

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This article was originally published on Fool.com