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

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 Kohl's latest 2025Q1 earnings call.



First Quarter Performance:
- Kohl’s 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.