Moms strategy will drive sales growth with credit to stay-at-home spouses
Moms are the highest-spending customer base for the company and they will continue to drive its sales. Kohl’s Corporation (NYSE:KSS) has invested a significant amount on customer research on ways to serve moms better. The management has indicated that new rules which are expected soon will grant credit to stay-at-home spouses. This plan is expected to increase the company’s penetration in this very large and loyal customer base.
Peer analysis
In the departmental stores segment, the company’s primary peers are Macy’s, Inc. (NYSE:M) and Nordstrom, Inc. (NYSE:JWN).
Macy’s, Inc. (NYSE:M) has taken initiatives in merchandise assortment as part of its “My Macy’s” strategy. This strategy focuses on the segmentation of stores and the localization of offerings. It will ensure quick delivery to 500 stores after the expansion of its delivery mechanism under the Omni-channel network. The company is currently targeting the “millennial” customer base which is made up of young, active and impulsive buyers through new product launches and brand extensions. Macy’s, Inc. (NYSE:M)has increased its marketing spending on digital and social media in hopes that it will attract this millennial customer base and increase company’s sales growth.
Nordstrom, Inc. (NYSE:JWN) has invested in technology to fuel its sales growth in its biggest growth driver, the Nordstrom Direct channel. Its enhanced technology will provide a better customer experience through online and mobile platforms. Its Rack stores channel is another growth driver, with higher earnings before interest and taxes margin levels than the company’s full-line stores. Its Fashion Rewards and Topshop merchandise will attract fashion-forward but price-conscious customers to its stores. Nordstrom has also announced an expansion plan into Canada which will provide additional long-term growth opportunities for the company.
| Company | P/S | 1 Year Fwd. P/E | Op. Margin |
|---|---|---|---|
| Kohl’s | 0.69 | 10.52 | 7.55% |
| Macy’s (NYSE:M) | 0.73 | 10.48 | 6.81% |
| Nordstrom Co. | 1.05 | 13.73 | 10% |
Source: Google Finance and Yahoo! Finance
Kohl’s has reported an operating margin of 7.55% and 1 year forward price-to-earnings ratio of 10.52, which is a moderate performance among the peers. Macy’s, Inc. (NYSE:M) has the lowest operating margin of 6.81% but with lowest forward price-to-earnings ratio of 10.48. Nordstrom has the highest operating margin of 10% among the peers but with highest forward price-to-earnings ratio of 13.73.
Conclusion
Kohl’s has reported mix results in its most recent quarter with negative comparable sales, but its earnings-per-share was better than consensus estimates. It has taken initiatives for growth and appointed a new CCO with increased marketing spending planned for the second quarter this fiscal year. The company’s investment in technology to drive growth and its focus on moms will help to provide growth in the long term. I believe that all these initiatives will turn sales growth positive as time goes by.
The article What Makes This Retailer a Good Bet? originally appeared on Fool.com.
Ash Sharma has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Ash is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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