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Kohl's (KSS) Gains From Splendid Comps & E-commerce Growth

Kohl's Corporation KSS has been gaining from its sturdy comparable store sales (comps) trend, which is backed by its constant efforts to drive sales. Also, the company has a strong brand portfolio and a solid e-commerce business.

Markedly, Kohl’s has been making robust efforts to draw shoppers and improve sales, which have helped the company deliver positive comps for four straight quarters now. Incidentally, comps registered an increase of 3.1% in second-quarter fiscal 2018, preceded by a 3.6% rise in the first quarter, and a 6.3% and 0.1% growth during the fourth and third quarter of fiscal 2017, respectively.

In the second quarter, comps gained from strength in both store and digital channels, while proprietary and national brands portrayed sturdy performances. Also, the company’s Men's and Women's apparel businesses along with Footwear performed impressively.

Kohl’s comps growth can be attributed to its strategic initiative — Greatness Agenda — as well as focus on boosting traffic and enhancing operational excellence. Notably, the Greatness Agenda initiative was commenced in first-quarter fiscal 2014, designed to drive transactions per store and sales.

This apart, the company has established a strong brand portfolio, with national brands such as Dockers, Levi’s, Columbia Sportswear COLM, Reebok, Champion, Oshkosh, Pfatzgraff, and KitchenAid. Exclusive brands such as Simply Vera by designer Vera Wang and Chaps by Polo Ralph Lauren have helped draw customers to Kohl's stores. Moreover, in the active category, brands like Adidas, Under Armour and Nike NKE have particularly been doing well.

Additionally, Kohl’s has been expanding its e-commerce fulfilment centers and opened its fifth facility in August 2017. The company also focuses on strengthening its in-store pickups. To this end, it launched Buy-Online-Ship-to-Store (or BOSS) in July, which will be rolled out to more stores in the coming months. This initiative, which is expected to widen assortments for customers for free pickup and store, is likely to bolster store traffic. Further, the company’s sustained focus on technology improvements and omnichannel expansion are expected to continue driving online sales. In the second quarter, digital sales witnessed a mid-teen increase, with almost half of it coming from mobile sales.

In a bid to drive traffic, Kohl’s has been strengthening its ties with retail giant Amazon AMZN, which is commendable. Incidentally, the company has started accepting returns for Amazon customers on select products and will also provide free packing and shipping services for the merchandise to Amazon’s fulfillment centers. This move followed Kohl's decision to sell Amazon devices, accessories and smart home devices in 10 selected stores in Los Angeles and Chicago. According to the company, this store-within-store concept will boost traffic and strengthen its business significantly.

Clearly, Kohl’s is likely to continue with its stellar show, evident from management’s raised outlook. Management now expects adjusted earnings in the band of $5.15-$5.55 per share, up from $5.05-$5.50 projected earlier.

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