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Kohl's cut back on jewelry to make room for Sephora. Now it's looking to boost sales.

Kohl's stores have carried jewelry for years, and soon there could be more options for shoppers to check out.

Several years ago, when Kohl’s Corp. brought in Sephora to create stores-with-stores, changes were needed to make space for the cosmetics retailer.

That space came from a part of stores that hadn’t been as profitable: jewelry. It cut down the amount of space for items such as luxury watches, rings, necklaces, earrings and other accessories to make space for Sephora. Three years later, nearly every Kohl's store has a Sephora and limited space for jewelry.

Even new stores have fewer than five two-sided racks for items like earrings, necklaces and bracelets.

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The Menomonee Falls, Wisconsin-based retailer now plans to use the popularity of the Sephora stores to boost sales in nearby departments − like jewelry.

The Sephora section of products are seen for sale at the Kohl's store on North 124th Street in Brookfield.
The Sephora section of products are seen for sale at the Kohl's store on North 124th Street in Brookfield.

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During a call with analysts discussing a disappointing first-quarter earnings report May 30, Kohl’s executives said they looking to accessories as part of its plan to rebound. The earnings showed the company's net sales fell 5.3% year-over-year to $3.2 billion with comparable sales down 4.4%. In the quarter the company lost $27 million compared with this point last year, when it made about $14 million in the first quarter of 2023.

“Over the past few years, as we made space for Sephora in our stores, we did not do a good job of retaining our jewelry sales, which had been on a consistent sales decline,” Kohl’s CEO Tom Kingsbury said on the earnings call.

Kingsbury added there is an opportunity to offer jewelry to customers and to grow in that area.

After former CEO Michelle Gass announced she was stepping down near the end of 2022, Kingsbury filled the role first as interim, then as full CEO. When he took over, the stock price was roughly $25 a share, and now it's about $22 a share.

In his first full fiscal year as CEO, Kingsbury oversaw a company that made $317 million in 2023 compared with the previous fiscal year, in which Kohl's lost $19 million.

Reduced inventory, new emphasis on gifting

During that first year, the company made changes including focusing on reducing its inventory and increasing gifting.

Reducing inventory meant a lot of items were on clearance and created financial challenges that became public on the first-quarter call.

“The clearance headwind really hurt us,” Kingsbury told analysts. “We took a ton of markdowns in the fourth quarter of ‘22 to clean all the inventory up, so obviously that was a huge headwind for us in the first quarter."

The company plans to build profits on increasing sales on items other than clothing. Kohl's said that during the first quarter it saw a 30% increase in gifting sales and a 60% increase in impulse sales − items around the checkout area.

The new emphasis on jewelry fits with that strategy.

“We are currently working to reestablish our presence, which will include expanding our in-store assortment and improving the in-store positioning by placing it near Sephora,” Kingsbury said, adding the changes should be in place in time for the holiday season.

The company also is "increasing relevancy" in areas such as apparel and dresses, moving juniors next to Sephora in stores, offering more men's clothing, and offering greater selection for kids.

Sephora is bright spot for Kohl’s

The partnership with Sephora continues to be an important part of the strategy for Kohl’s to bring in new customers.

On the call with analysts, Kingsbury said the company plans to open 140 more Sephoras at Kohl’s stores, so about 1,050 of the nearly 1,200 Kohl’s stores would have a Sephora.

The company reported more than $1.4 billion in sales at Sephora at Kohl’s stores in 2023 and expected to hit more than $2 billion in sales by 2025.

“Sephora continues to be an important driver of new customer acquisition,” Kingsbury said. “We are also continuing to attract a younger, more diverse customer who shops more frequently as we’ve expanded Sephora across our store base.”

This article originally appeared on Milwaukee Journal Sentinel: Kohl's hopes to give a new boost to jewelry sales part of turnaround