Kohl's cuts inventory for 12th quarter in a row
- Kohl's posted its 12th straight quarter of inventory reduction in the fourth quarter, according to executives on a recent earnings call.
- Gross inventory for 2018 was down 2% per store and 3% in units, said CFO Bruce Besanko, noting the retailer is aiming for a larger mid-single-digit reduction in 2019.
- "I would say when I look at the levels of inventory turn in our past, we have still room to improve. We're certainly not in the early innings, but there's still a nice gap between what we once had from an inventory turn perspective and what we experienced even after these 12 consecutive quarters of reductions," Besanko said.
Kohl's has been on a mission to cut inventory since CEO Michelle Gass was brought on as chief merchandising officer in 2013. The chain concluded that to stay alive, it needed to offer fewer but more relevant choices for customers.
"Inventory management has been a key enabler. We often talk about it in the context of margin, but it's also a sales driver," explained Gass this week. Full-year comparable sales grew 1.7%, while total revenue decreased by 3.3% to end the quarter at $6.8 billion. Gass described the company as "financially strong."
Part of the reason Kohl's has been able to keep inventory on a downward slope is the chain has worked to drastically reduce lead times, especially in women's fashion, from 16 weeks to eight weeks — dubbed the "speed initiative," which Gass said continues.
Speed is also paramount on the e-commerce side and for this, Kohl's will open a sixth e-commerce fulfillment center (EFC) this year. To facilitate even faster ship times, 40% of online orders are fulfilled from stores. The company has also been successful in nudging customers toward the buy-online pickup in-store (BOPIS) option, according to Gass — perhaps the cheapest form of online order fulfillment for any retailer.
Gass said Kohl's is investing in data and technology to closely manage tighter inventory, whether purchases come in-store or online. "Predictive analytics" currently help the chain manage supply at EFCs, and more technology investments are on the way to improve store inventory allocations.
"While the bar raises on inventory management we’re investing technology to increase our sophistication, predictive analytics to really know where and how to place that inventory," Gass said.
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