Retailers shift their ad spending from TV, radio and print ads to digital ads.
E-commerce grew 39% while total sales and store sales declined 1% and 2.7%, respectively.
Total revenue and comparable-store sales declined for Kohl’s Corp. in the second quarter, but it was a different story for e-commerce.
For the second quarter ended July 28, Kohl’s, No. 28 in 2012 the Internet Retailer Top 500 reported:
Web sales increased year over year 38.6% to $237 million from $171 million in the second quarter of 2011.
- Total sales declined 0.9% to $4.20 billion from $4.24 billion.
- Comparable-store sales declined 2.7%.
- Net income was $240 million compared with $299 million in the second quarter of 2011.
The web accounted for 5.6% of total sales compared with 4.0% in the second quarter of 2011.
For the first two quarters:
- Web sales increased year over year 36.3% to $488 million from $358 million in the first two quarters of 2011.
- Total sales grew about 0.4% to $8.44 billion from $8.41 billion.
- Comparable-store sales declined 1.3%.
- Net income was $394 million compared with $500 million in the second quarter of 2011.
The web accounted for 5.8% of total sales compared with 4.3% in the second quarter of 2011.
While store sales declined and year-to-date revenue was essentially flat, Kohl’s is on track with its e-commerce expectations, CEO Kevin Mansell told Wall Street analysts on the second quarter earnings call. “E-commerce is in line with the 40% goal that we laid out at the beginning of the year,” he said. “We’ve continued to invest around all the aspects of this business, including technology improvements, more efficient fulfillment capabilities and a larger and more experienced organization.”
While Kohl’s didn’t provide any specific metrics, over time the retailer expects the its e-commerce channel will be more profitable, in terms of return on investment, than its stores, even though the operating margin will be lower online. “In the longer term, I think the e-commerce operating margin will probably remain slightly below the store because we have a lot of investment planned over the next three years for e-commerce,” chief financial officer Wesley McDonald told Wall Street analysts. “From a return on investment perspective, my expectations will be in a couple of years to be significantly better than brick-and-mortar stores, even with the lower operating margin, given the fact that our investment will start to tail off.”
Kohl’s has invested heavily in e-commerce in the past 18 months, especially with building out more regional e-commerce fulfillment centers. In 2013, Kohl’s also expects to launch a new e-commerce platform, but didn’t provide specifics. “We're going to re-platform in the spring of next year,” McDonald said. “That requires a lot of capital.”