Sephora deal is ‘a real coup’ for Kohl’s, CEO says

March 23, 2024

Sephora’s performance at Kohl’s is helping the department store drive growth, CEO Tom Kingsbury said on Tuesday, March 19. At the same time, the retailer is pursuing a larger overall revamp of its shopping experience by broadening its offering with consistent newness, trendy merchandise and the addition of familiar big-name retail brands through store-in-store partnerships, reports Retail Dive.

“Kohl’s, candidly, was never really in the beauty business,” Kingsbury said during an on-stage interview at Shoptalk in Las Vegas last week. But now—due to the beauty retailer’s presence at Kohl’s—Kingsbury says that 40% of customers who shop Sephora at Kohl’s are new to the department store. Additionally, Sephora brings a younger, more diverse, trend-oriented customer to Kohl’s. And 40% of those customers who came for Sephora have additional items in their basket.

Sephora at Kohl’s sales exceeded $1.4 billion in 2023. Based on that trajectory, the retailer says it expects Sephora’s sales to surpass a previously projected goal of $2 billion in sales by 2025, Kohl’s said last week.

The department store is expanding a small-format version of the store concept as well. Those 750-square-foot store-in-stores offer a curated merchandising approach with products displayed by category instead of brand. The intent behind that move, the company says, is to simplify the shopping experience for customers. The offering includes well-known brands in makeup, skin care, hair, and fragrance.

“Over the past three years, Sephora at Kohl’s has become a beauty share leader, and our continued investment in bringing prestige beauty offerings to more stores this year demonstrates our steadfast belief in the power of our partnership,” Nick Jones, Kohl’s chief merchandising and digital officer, said in a March 12 announcement about the sales milestone.

At the end of 2023, Kohl’s had Sephora in about 900 of its approximately 1,200 stores. The retailer plans to open 140 more Sephora small-format shops this summer. The entire chain should have the beauty brand shop-in-shops by 2025.

The partnership with Sephora was first announced in 2020 and the shop-in-shops began opening in 2021. The beauty brand had a similar partnership with J.C. Penney for well over a decade.

Getting Sephora in Kohl’s was “a real coup,” says Kingsbury, who has been in the CEO role for about a year Under his leadership, Kingsbury acknowledge that he’s implementing some strategies from the off-price sector at Kohl’s, like making newness more visible in stores.

In addition to always having fresh merchandise on the sales floor, Kohl’s has also improved its inventory management strategy—specifically open-to-buy.

“Previously Kohl’s never had any money to buy products because they were always overbought,” Kingsbury says, adding that he addressed that issue “right away.”

Now, he said, the retailer can pursue products more like off-price retailers.

Kohl’s also has shifted how it buys products. Before, Kohl’s would buy products 12 to 14 months out. But by the time it hit the sales floor, “it was dead on arrival,” Kingsbury says.

In line with these plans, Kohl’s recently announced an exclusive licensing agreement with Babies R Us. The first Babies R Us shop-in-shops are expected to open in August. Long-term plans call for adding Babies R Us to 200 stores in the fall.

Research contact: @RetailDive