Tag: Petco Health and Wellness Company Inc

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

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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

Home goods may have been a hot pandemic category, but Kohl’s is betting it’s a big business opportunity now.

During the holiday season, shoppers may notice an expanded mix of items that could spruce up their homes, or help as they host friends or look for something to go under the Christmas tree. For example, stores are carrying more glassware and items for party hosts, such as copper mugs, champagne flutes and cocktail shakers.

Kohl’s already sold bedding, small appliances, picture frames and more. Yet on the company’s earnings call in August, Kingsbury spoke about home goods as one of the company’s biggest growth areas, saying it’s working with new vendors and adding lighting, wall art and more.

The demise of bankrupt Bed Bath & Beyond has created room for retailers, including Kohl’s, to grab more market share in the space. The economic backdrop could be a factor, too.

As some Americans decide against moving because of high interest rates, they may want to buy decorations to freshen up their current homes, Jones said.

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

Add Kohl’s to the list of retailers trying to cash in on the pandemic pet boom.

The retailer is dedicating more square footage to dog beds, cat towers and some pet items that get replenished more frequently, such as treats and shampoo.

Kohl’s decided to expand across the chain after a successful test at 50 stores last fall, Kingsbury said on the earnings call in August. The company wouldn’t quantify the number of stores with more pet merchandise, but Jones said the Ramsey store, which reflects its holiday look, has twice the amount of items in the category that it did a year ago.

Other retailers have also zeroed in on the category, which has historically been more resilient during recessions and economic downturns. Lowe’s struck a deal with Petco Health & Wellness to open mini shops in a growing number of its stores and Walmart recently announced the opening of its first pet health center with vet care.

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

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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

POPSHELF

  • 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

DOLLAR GENERAL

  • 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

Discounters and off-price brands have led the way with store expansion in recent years. Dollar General is the fastest-growing retailer in the country by store count, according to Coresight Research, a retail-focused advisory firm. Its namesake banner has grown at a rapid clip, too. The company plans to open about 1,050 new stores in the U.S. in the coming fiscal year — including the Popshelf locations.

Eight other discounters and off-price brands round out the top ten, including Popshelf’s competitors Dollar Tree, Five Below and Home Goods, which is part of TJX Companies.

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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