Kohl's Q1 2025 Earnings Call: Unpacking Contradictions in Strategy, Sephora Rollout, and Credit Performance

Earnings DecryptThursday, May 29, 2025 1:07 pm ET
3min read
Customer focus and strategic priorities, Sephora rollout and strategy, credit card performance and strategy, Sephora integration and partnership, and Sephora integration and cross-shopping impact are the key contradictions discussed in latest 2025Q1 earnings call.

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First Quarter Performance:
- reported a 4.1% decline in net sales and a 3.9% decrease in comparable sales for Q1 2025, with a 2.6% decline in comparable store sales.
- The decline was attributed to a reduction in store count, with 24 stores closed, and a 7.7% decline in digital sales due to underperformance in home categories and core credit customers.

Proprietary Brands and Product Assortment:
- Kohl’s saw a 10% increase in jewelry sales and a significant improvement in the petite business, which was up high teens due to the introduction of new brands.
- The increase in sales was driven by a return to a more balanced product assortment, including the reintroduction of jewelry and focusing on proprietary brands that resonate with core loyal customers.

Sephora Partnership Expansion:
- The full rollout of 1,100+ Sephora at Kohl’s stores was completed, with a 6% increase in net sales and 1% in comparable sales for Sephora in Q1.
- The partnership has contributed to a nearly $2 billion beauty business, with positive market share gains in fragrance, hair, and makeup categories.

Operational Efficiency and Cost Management:
- Kohl’s achieved a 5.2% reduction in SG&A expenses, leveraging approximately 32 basis points versus the prior year, with additional benefits from inventory management and lower store spending.
- This was driven by efforts to create a more efficient organization and reduce costs to invest in growth initiatives, contributing to a 5% reduction in SG&A costs this quarter.