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Kohl's Hopes to Add $2B in Sales by 2025 in Sephora Rollout

Published August 19, 2022
Published August 19, 2022

A year into their partnership with Sephora, Kohl’s is expanding their 600-store footprint, rolling out the Sephora at Kohl’s shop-in-shop concept to all 1,100-plus Kohl's locations. Kohl’s projects that Sephora at Kohl's will achieve $2 billion in annual sales by 2025.

"For such a big endeavor, our partnership with Kohl's has been executed extremely well and has delivered incredible results thus far, and there is so much potential to this partnership with the addition of 400 stores that have opened this summer," said Jean-André Rougeot, President and Chief Executive Officer, Sephora Americas.

The strategic partnership was introduced in 2021 with a plan to open 850 Kohl's stores by 2023. In the fall of 2021, Kohl's opened 200 stores, followed by an additional rollout of 400 more locations this summer. By 2023, the retailer will have opened 850 full-sized, 2,500-square-foot Sephora at Kohl's locations across the country. The rollout has also been at the center of Kohl's store remodels, providing the impetus to update, refresh, and reflow stores.

"Sephora at Kohl's provides our customers with easier access to prestige beauty, and the partnership has brought in new, younger and more diverse customers to Kohl's. We are incredibly proud of how our companies have come together so seamlessly to create a truly unprecedented and unique in-store experience," said Michelle Gass, Kohl's Chief Executive Officer. "We couldn't be happier with how our partnership with Sephora continues to perform and achieve the goals we set out to accomplish. Our success to date proves that this partnership is working, and this expansion is the next, exciting chapter in our history together."

The concept launched with a merchandising plan that included 125 brands curated from Sephora's assortment, with six additional brands—Versace, Murad, Clarins, Living Proof, Jack Black, and Voluspa—signed in 2022. The shop-in-shop assortment will expand fragrance offerings, and men's grooming will receive a dedicated space.

While intelligence on performance is hard to come by, the retailers said that top-selling brands include Sephora Collection, Sol de Janeiro, NARS, Fenty Beauty, Charlotte Tilbury, Olaplex, and Too Faced. Notably, Charlotte Tilbury will expand its assortment in the coming weeks, given its strong performance thus far.

"Sephora at Kohl's provides our customers with easier access to prestige beauty, and the partnership has brought in new, younger and more diverse customers to Kohl's," said Gass.

Rougeot said, "In the past twelve months, we've been able to bring the premium experience Sephora is known and loved for to new communities across the country, giving them the access to beauty that we know they are yearning for. With a significant number of new Beauty Insiders, including the successful re-engagement of clients and holiday shopping ahead, the reality is that one year results are very encouraging, but this is just the beginning."

Just The Facts and Numbers: 

  • The 200 Sephora at Kohl's that opened in 2021 have maintained a high single-digit percent sales lift, relative to the balance of the chain. And in the nearly 400 stores opened this year, Kohl's is seeing a mid-single digit percent sales lift, which is consistent with the initial performance in the first 200 stores.
  • Roughly half of all customers buying Sephora are attaching at least one other category in their purchase.
  • Kohl's projects that Sephora at Kohl's will grow to achieve $2 billion in annual sales by 2025.
  • The partnership is attracting new, younger, and more diverse customers.
  • Customers that shop Sephora at Kohl's visit more frequently than Kohl’s average customer.
  • Kohl's has acquired more than one million new customers since launching the partnership in August 2021. 
  • Sephora at Kohl's brands are also benefiting from this increased distribution.

Continued Innovation and Optimizations

  • The ability to purchase and redeem Sephora gift cards at Kohl's stores, regardless of where the gift cards were purchased, just in time for holiday gifting.
  • The piloting of a cross-company Buy Online, Pick-Up In Store offering, enabling shoppers to buy on and pick up at Kohl's stores.
  • Continued cross-store promotions that make Sephora savings equally accessible to Sephora at Kohl's customers.
  • The addition of Sephora beauty outposts adjacent to Amazon Returns within Kohl's stores.
  • Later this year, Kohl's and Sephora will significantly expand the holiday gifting assortment and increase the marketing investment, positioning the 600 stores with Sephora at Kohl's and for a big traffic driver during holiday.

Gass said, " Kohl's shared our Q2 earnings results and despite a difficult macro environment that many of us are facing right now, we continue to have strong conviction in our transformation strategy—positioning Kohl's as a leader in the active and casual lifestyle. Our partnership with Sephora plays an instrumental role in delivering against this vision, and we're just getting started."

Kohl's is bullish on Sephora's ability to modernize its reputation and appeal to more consumers, but some experts are skeptical.

"This is not a bad initiative, and it does give people a reason to visit. However, the contrast between a bright and orderly Sephora and the dismal disarray of the rest of Kohl's is like going from The Shire into Mordor. And very few people want to venture into Mordor," GlobalData Managing Director Neil Saunders told Retail Dive. "In our view, relying on Sephora to revitalize the wider business is folly. It is a part of the solution, not the solution itself—as J.C. Penney, which used the same approach, found out to its cost."

Kohl's slashed its guidance for full-year sales and margins last week, reporting Q2 total revenue fell 8.1% year over year to $4.1 billion, with net sales down 8.5% and comps down 7.7%. Net income fell 62.6%, operating income fell 53.3%, and gross margin contracted 290 basis points to 39.6%. The retailer now expects its 2022 net sales to fall 5% to 6% year over year, with operating margin expected to be 4.2% to 4.5%.


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