Kohl’s (KSS) Q4 2023 earnings report, Babies R Us deal

Kohl’s said Tuesday that it’s teaming up with the owner of Babies R Us to bring baby gear, furniture and more to approximately 200 of its stores across the country.

The retailer struck a licensing deal with WHP Global, a brand management firm with a portfolio that includes Bonobos, Joe’s Jeans and Anne Klein. The two companies did not disclose the terms of the agreement.

Kohl’s said the first Babies R Us shops will open this August and expand to more stores in the fall. The shops will range from 750 to 2,500 square feet, and will add more brands and merchandise to Kohl’s baby category. The new shops will be set up next to the baby merchandise that the retailer already carries, including clothes and items from Graco, Carter’s and Fisher-Price.

Later this fall, customers will also see an expanded assortment of baby products on Kohl’s website, and the company will launch a baby registry, Kingsbury said on an earnings call.

With the move, Kohl’s is adding another potential growth driver. It’s been trying to turn around declining sales and attract more customers while led by its new CEO Tom Kingsbury, the former CEO of off-price chain Burlington Stores. Kohl’s former CEO Michelle Gass left the company in late 2022 to eventually take over the top role at Levi Strauss after intense pressure from activists and a failed effort to sell to the Franchise Group, owner of The Vitamin Shoppe.

On an earnings call, Kingsbury said the expanded baby category fits into Kohl’s strategy to have a more relevant mix of merchandise.

“It’s just part of our overall campaign to get younger customers into our stores,” he said.

The move will also fill a need, he added. Some of the best-known specialty retailers for baby gear have shuttered.

Babies R Us, the brand that was bought by WHP Global, closed its stores after its parent company Toys R Us filed for bankruptcy. Buy Buy Baby stores also closed after its parent company, Bed Bath & Beyond, filed for bankruptcy. (Some of the Buy Buy Baby stores have reopened under a new owner.)

Along with Babies R Us, Kohl’s has a deal with Sephora that has opened beauty shops inside of hundreds of its stores.

WHP Global has a similar deal with Macy’s, which has opened Toys R Us shops inside of many of its stores.

Kohl’s shared the news as it reported its holiday-quarter quarter earnings results. The retailer topped Wall Street’s holiday-quarter expectations for earnings and revenue, but its net sales declined 1.1%. Its comparable sales, a metric that takes out the impact of store openings, closures and renovations, dropped 4.3%.

Kohl’s gave conservative guidance for the year ahead. It said it expects net sales to range from a 1% decrease to 1% increase for the full year and comparable sales to range from flat to 2% higher. It expects earnings per share between $2.10 and $2.70, excluding any non-recurring charges. That would represent a drop from $2.85 in the previous fiscal year.

During the holiday season, Kohl’s offered glimpses of its turnaround plan. It expanded its assortment of pet merchandise, home decor, and impulse and gifting items to drive sales. It leaned on Sephora shops inside of its stores to draw shoppers. And it cleared away space in front of stores to make trendy and seasonal items more prominent when customers walked into a location.

As of Monday’s close, Kohl’s shares have fallen about 5% so far this year. That’s trailed behind the approximately 7% gains of the S&P 500 during the same period. Kohl’s shares closed on Monday at $27.19, bringing the company’s market value to $3.01 billion.