Kohl’s holiday look previews the retailer’s plans to snap out of sales slump

At Kohl’s stores, Chief Merchant Nick Jones said shoppers will see a mix of elevated items and sharp price points. For example, the company has signs that call attention to low prices of some sweaters, but is also has added European-made glassware to its home decor.

Melissa Repko | CNBC

As shoppers head to Kohl’s stores this holiday season, they will see gift ideas, Christmas ornaments and a potential glimpse of the retailer’s future.

It marks the first peak shopping season overseen by Kohl’s new CEO, Tom Kingsbury. The retail veteran, who previously led off-price chain Burlington Stores, officially stepped into the role early this year after serving on an interim basis. He succeeded Michelle Gass, who departed to become CEO-elect of Levi Strauss.

Kohl’s kicked off the latest effort to refresh its brand as it navigates a confusing economic backdrop, and after it faced scrutiny from activist investors and failed to secure a deal to sell to the Franchise Group, owner of The Vitamin Shoppe. Its sales and stock price have lagged.

As it tries to turn around its fortunes, Kohl’s has focused on sharpening the look of its stores and the brands and merchandise it carries, Kingsbury said. By leaning into popular brands and categories, he said the company could return to sales growth in 2024.

“Home decor, pet, gifting, impulse, all the things that we’ve been talking about will really help us get there,” he told investors on an August earnings call.

Net sales for Kohl’s most recent full fiscal year, which ended in January, totaled $17.2 billion — a nearly 9% drop from the fiscal year that ended in early 2020, shortly before the Covid pandemic shook up spending patterns.

Shares of the company are down about 17% this year, underperforming the 12% gains of the S&P 500 and the roughly flat performance of the retail ETF, the XRT.

Kohl’s has forecast that full-year sales will decline by 2% to 4%, including the approximately 1% impact of a fiscal year that’s one week shorter.

Along with its own strategy shift, Kohl’s is gearing up for a season when consumers have sent conflicting messages about how much they’re willing to spend and what they think is worth buying, even as some tighten their belts.

At a store tour in Ramsey, New Jersey, this week, even some timely items like Christmas decor and fall sweaters were 40% or 50% off — an indicator that the retailer is trying to move merchandise and appeal to more budget-minded customers.

“We know they’re stretched,” Chief Marketing Officer Christie Raymond said. She said the company is watching factors like rising credit card debt, dwindling savings and the return of pandemic-paused student loan payments.

But she added shoppers are still spending — sometimes starting early to hunt for the best deals or perfect items that seem worth the money.

Kohl’s set its holiday merchandise at stores in the first week of October, weeks earlier than the pre-pandemic holiday season in 2019 and even earlier than the past couple of years, when Covid threw off the typical shopping cadence, Raymond said.

Here are major strategies that Kohl’s is leaning into this holiday season and beyond:

Beauty is one of the rare discretionary categories where shoppers have been splurging, despite inflation. Kohl’s has leaned in by opening more Sephora shops inside of its stores.

Melissa Repko | CNBC

Betting on beauty

From perfume to mascara, beauty is one of rare categories where shoppers have continued to splurge — even as they deal with pricier groceries, higher interest rates and bigger utility bills.

Kohl’s has leaned into that by adding more Sephora shops to its stores. This holiday season, it will have about 900 of the shops — meaning they’re now in the vast majority of its more than 1,100 stores across the country. It will carry some exclusive items, too, like gift sets only sold at Kohl’s.

It’ll be a bigger part of this holiday season. A year ago, roughly half of Kohl’s stores had a Sephora shop. Two holiday seasons ago, which marked its first with the beauty shops, they were in 200 locations.

Sephora at Kohl’s has been one of the company’s brightest spots, especially during a time when customers have become more reluctant to spring for discretionary items. Total beauty sales for the company rose nearly 90% year over year as of July 29, the end of the most recent fiscal quarter.

Raymond said Sephora has drawn younger, more diverse shoppers to stores, but also been popular with Kohl’s longtime customers.

In the next few years, Kohl’s plans to open smaller versions of the shops in the rest of its stores. And it’s looking for ways to get those new customers it’s reeled in to browse and buy merchandise from other parts of the store, said Nick Jones, the company’s new chief merchandising and digital officer. He joined Kohl’s earlier this year, after working for British retailers, including Marks & Spencer and ASDA/Walmart UK.

Kohl’s has expanded areas where shoppers can grab last-minute items.

Melissa Repko | CNBC

Leaning into impulse buys

As shoppers rush around during the peak shopping season, Kohl’s wants to tempt them to grab one — or ideally, two or three — more things.

Kohl’s has made more room in the cash register area for impulse items and stocking stuffers, such as candies, small toys and stuffed animals. It also has a dedicated display of grab-and-go beauty items from Sephora, such as face masks or lipsticks.

It’s also sprinkled gift ideas throughout its stores, such as aisles where customers may spot a Barbie dream house for their child or a high-tech toaster oven for their sister-in-law.

Jones said Kohl’s wants to simplify the season for busy families. That means not only having a wide variety of merchandise, but also guiding them toward good deals with signs that advertise discounts and displays that include creative gift ideas, such as a colorful sweater, children’s books or a collection of hot sauces.

It also cleared away space in the front of stores by taking out some cash registers, so that customers see trend-driven or seasonal items when they walk in.

Kohl’s sells cookware and throw pillows, but it’s adding more home decor like wall art and vases, too.

Melissa Repko | CNBC

A haul for the home

Pet merchandise is getting more square footage at Kohl’s stores. The retailer is carrying dog and cat toys, but also items like shampoo and treats.

Melissa Repko | CNBC

And something for Fido, too

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Target shoppers can now make a return without leaving the car

Target is dangling a new perk to get shoppers to swing by its stores: customers can make returns without leaving their car.

The curbside-returns service, which began last week at roughly a quarter of Target’s nearly 2,000 stores nationwide, will be available across the chain by the end of summer. 

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Target is sweetening its curbside-pickup service, Drive Up, to attract and retain customers as the retailer braces for a potential sales slowdown and tries to hang on to pandemic-fueled gains. Total annual revenue grew by about $31 billion – or nearly 40% – from fiscal 2019 to 2022.

Now, as shoppers become more budget conscious and buy fewer discretionary items, Target said it expects comparable sales to range from a low single-digit decline to a low single-digit increase this fiscal year. At an investor day in February, it projected full-year earnings per share of between $7.75 and $8.75, below Wall Street’s expectations of $9.23 per share, according to StreetAccount estimates.

The company hopes convenient perks like curbside returns will boost customer loyalty and jolt sales.

“Any time we remove friction from our guest experience it benefits the guests and benefits Target because they deepen their relationship with us,” Chief Stores Officer Mark Schindele said. “We’ve shown that with Drive Up overall. Guests try that service, they love it and then they shop our stores more often.”

Curbside pickup became a bigger sales driver for retailers’ e-commerce businesses, especially as shoppers tried to avoid crowds during the Covid pandemic. For some shoppers, the habit has stuck as work and home schedules are fuller and commutes are back — and retailers including Target and rival Walmart now aim to capitalize on that.

Click-and-collect, a term used to describe buying online and picking up purchases curbside or in store, grew from 6% of overall e-commerce sales in the U.S. in 2019 to 11% in 2022, according to data from Euromonitor, a market research firm.

Delivery still accounts for the majority of online sales, but click-and-collect drove about $114 billion of sales in 2022 — a jump from $36 billion in 2019, according to Euromonitor.

In the U.S., the vast majority of click-and-collect comes from curbside pickups, said Bob Hoyler, industry manager for retail research at Euromonitor. 

The market research firm anticipates click-and-collect sales in dollars will grow by 8% this year, compared with 2% for delivery. The growth will be fueled by consumers who opt for curbside pickup to avoid delivery fees or shipping minimums at a time of heightened price sensitivity, Hoyler said.

Target debuted Drive Up in 2017 as a test in Minneapolis, where the company is based. It expanded the service to stores across all 50 states in 2019. It added fresh and frozen groceries in 2020, and tacked on wine and beer the following year. 

Last year, the retailer expanded the service to allow shoppers to order a Starbucks drink to retrieve when they pick up their curbside order. The service is available at about 240 stores.

Sales fulfilled through Drive Up grew more than 70% in the fiscal year that ended in late January 2022, on top of a more than 600% boom during the prior fiscal year, the company said. Drive Up sales grew more than 10% in the most recent fiscal year.

Target’s same-day services, which include Drive Up, accounted for more than half of digital sales as of late January as consumers embrace convenience. Same-day services also include Target-owned delivery service Shipt and Order Pickup, which allows shoppers to retrieve an online purchase inside of a store.

The retailer’s average fulfillment cost per unit has fallen by 40% over the past four years as those services grow, Chief Operating Officer John Mulligan said at an investor day in February. More than 95% of Target’s total sales, including digital, are fulfilled in stores.

Other retailers have added to curbside pickup. Walmart rolled out curbside returns at all of its stores ahead of the 2022 holiday season. Dick’s Sporting Goods added curbside returns to its services in 2020 and offers it across all of its stores.

Neither company would quantify the use of curbside pickup or returns, but Walmart said it has seen nearly double the volume of customers using curbside returns from its launch across the chain last fall compared with this month.

At an investor event earlier this month, Walmart CEO Doug McMillon said the retailer is competing on convenience, too. He credited pickup and delivery for driving growth in recent years, and said the company’s recent survey results show customers are choosing the big-box retail giant to save time along with money.

Yet other retailers such as Kohl’s have eliminated curbside pickup. It ended the service last summer, swapping it out for a self-pickup service inside of stores.

The company’s shift to self pickup is part of efforts to cut costs, including by reducing its payroll, Chief Financial Officer Jill Timm said in September at a Goldman Sachs conference. She said Kohl’s is also testing self checkout and self returns.

For some retailers, the time and labor of curbside pickup can be hard to justify — especially since it encourages shoppers to stay in their cars rather than step into stores where they may fill up their carts with more purchases, Euromonitor’s Hoyler said.

Those concerns fueled skepticism of curbside returns within Target, too.

Most Target returns are made at the store, according to the company. Inside of a store, a shopper may swap out a returned product for another or grab an impulse item.

At Target’s investor day in late February, Citibank analyst Paul Lejuez asked if the retailer would ultimately miss out on purchases by adding curbside returns.

Schindele, the chief stores officer, said Target is focused on the lifetime value of a customer, not just the economics of a single transaction. He said allowing curbside returns also helps the retailer get unwanted items back on the sales floor faster and lowers the cost of mail-in returns.

He added that curbside pickup still inspires browsing and other purchases. On average, about 20% of customers who pick up Drive Up orders also make an in-store purchase on the same day, he said.

“What we find is when a guest uses Drive Up — and it could be Drive Up returns, it could be Drive Up purchase — we find that they spend more money in store over the course of the year.”

During tests of curbside returns, some shoppers have stopped by just to return an item, Schindele said. Others have picked up purchases while making a return. Still others have retrieved items they bought, made a return and gotten a Starbucks drink.

For Target, curbside returns could serve as a differentiator and a complement to the merchandise mix it sells, Hoyler said. Target’s sales focus is on general merchandise, such as apparel and beauty products, with only roughly 20% of its annual sales coming from grocery items. That’s much less than Walmart, which draws nearly 60% of its annual U.S. sales from grocery.

That general merchandise tends to be returned much more often than items like milk and bananas, he said.

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Dollar General’s new Popshelf stores chase inflation-weary shoppers in the suburbs

HENDERSONVILLE, Tennessee — Dollar General‘s next big strategy for growth is tucked in a strip mall in suburban Nashville, and it is coming to other cities soon.

It’s a new store called Popshelf. Over the past two years, the Tennessee-based discounter has tested the store concept, which caters to suburban shoppers with higher incomes, but sells most items for $5 or less.

A wide range of merchandise fills the shelves, including holiday-themed platters, party and crafting supplies, novelty foods such as gourmet chocolates and Portobello mushroom jerky, and gifts like dangly earrings, lip gloss and toys. It’s designed to be a treasure hunt that keeps shoppers coming back.

Now, with inflation still high, Dollar General is ramping up its plans for Popshelf. It aims to double the banner’s locations to approximately 300 stores next year. Over the next three years, it plans to grow to about 1,000 locations across the country. Eventually, it sees an opportunity to reach about 3,000 total locations. It is also testing mini Popshelf shops inside of some of its Dollar General stores. So far, it has about 40 of those shops.

But Popshelf will have to prove it can hold up in a tougher economy. Walmart, Best Buy, Costco and others have warned of weaker sales of discretionary items as consumers spend more on necessities. Target recently cut its holiday quarter forecast, and Kohl’s pulled its outlook, citing middle-income consumers who feel stretched.

On Dollar General’s recent earnings call, CEO Jeff Owen said even customers who make $100,000 a year have been shopping at its stores.

Chief Merchandising Officer Emily Taylor said Popshelf can draw spending-conscious shoppers by offering items that don’t cause guilt.

“The fact that we have such great value across a lot of these categories gives our customers at Popshelf an opportunity to really treat themselves at a time where they may have a difficult time doing that in other locations,” she said.

Higher incomes, higher profits

Popshelf is designed to drive higher sales and higher profits than the Dollar General store banner. It has more general merchandise, which typically has higher margins than food. Each Popshelf store is projected to hit between $1.7 million and $2 million in sales annually with an average gross margin rate that exceeds 40%.

In the third quarter, Dollar General’s gross profit as a percentage of net sales was 30.5%. That includes all of its stores, but the vast majority are under the namesake banner. It does not disclose annual or quarterly sales on a store level.

By the numbers


  • About 100 stores in nine states
  • Carries mix of home goods, seasonal decor, party supplies, crafts and toys
  • Most items for $5 or less
  • Suburban locations
  • Draws shoppers with a household annual income from $50,000 to $125,000


  • About 18,800 stores in 47 states
  • Carries many everyday items, such as food, cleaning supplies and paper products
  • A mix of price points, with about 20% of items for $1 or less
  • About 75% of stores are in small towns or rural areas with 20,000 people or less
  • Core customers have an annual household income of $40,000 or less

Source: Dollar General

The new store concept also courts a wealthier customer who lives in the suburbs — like a busy mom who is juggling a couple of kids, said Tracey Herrmann, senior vice president of channel innovation. That customer may need to buy toothpaste and cleaning supplies, but she wants to go a place where she can browse and toss fun items into her basket as well, Herrmann said.

Inside of Popshelf stores, the brands and items on shelves reflect that customer. For example, stores sell food and household brands often carried by higher-end grocers, such as Mrs. Meyer’s hand soap, Amy’s frozen meals and Tillamook cheese. It has a selection of global snacks, such as Pocky and Hello Panda. And it has specialty kitchen and baking items, such as inexpensive spices and unique condiments.

It also has exclusive brands, such as its own line of low-priced candles, room sprays and diffusers — including a signature scent, Citron Berry, which fills up its store. It carries some private brands sold by Dollar General, such as Believe Beauty, a makeup brand that’s been touted by influencers, including Bethenny Frankel of Bravo’s “The Real Housewives of New York City.”

It has rotating seasonal items, depending on the time of year, such as Christmas decor, pumpkin-themed items, bright colors for Easter and beach towels in the summer.

Herrmann said the store’s name was inspired by that mix of merchandise, which constantly gets refreshed.

“We believe the product pops off the shelf and really brings itself to life without us really even having to do much with it,” she said.

Discounters’ time to shine

Over the past several years, John Mercer, Coresight’s head of global research, said those value-conscious retailers have benefited from millennials buying homes and starting families as they juggle expenses such as college debt. Plus, he said, members of the second-largest generation — baby boomers — are looking for value as they retire and live on a fixed income.

Inflation has become an additional tailwind for the off-price and discounter sector this year and into 2023, he said.

Dollar General has historically performed well in economic downturns. It posted same-store sales gains during every quarter of the Great Recession in the late 2000s. On the other hand, Target, Macy’s, Nordstrom and Kohl’s were among the retailers with seven or eight quarters of negative same-store sales in that period.

Investors have been bullish about Dollar General. Shares of Dollar General have risen about 4% so far this year, as the S&P 500 Index has fallen by about 16% in the same period.

Corey Tarlowe, a retail analyst for Jefferies, said Popshelf may face some pressure in the near term as consumers think more carefully about purchases. Yet he said the tight labor market means most shoppers are still employed. Plus, he added, Popshelf’s middle- or upper-income consumer likely has a larger budget and bigger bank account.

Tarlowe said the store’s wide mix means it can steal away share from many different retailers, including crafting stores like Joann, Michaels and Hobby Lobby, pet stores like Petco, drugstores like CVS and Walgreens and dollar stores like Five Below and Dollar Tree.

“At the end of the day, it’s all about the value messaging,” he said. “That’s the core of it. It’s Dollar General pricing wrapped in a pretty bow.”

–CNBC’s Nick Wells contributed to this report.

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