• by Sarah Mahoney  @mahoney_sarah, March 12, 2024

Kohl’s is teaming up with Babies R Us in hopes that those shops-within-shops can lure more consumers to its stores.

The retailer also announced fourth-quarter financial results that indicate that turnaround efforts are starting to bear fruit.

The deal is in partnership with WHP Global, which now owns Babies R Us. WHP also owns Toys R Us, reviving the once-bankrupt brand in a collaboration with Macy’s.

Kohl’s believes the effort will help it reach more new customers, including younger families, and plans to open 200 locations this fall.

“Evolving our assortment and bringing more relevant product to the millions of customers we serve is a core focus as we continue to deliver on Kohl’s broader growth strategy,” says Tom Kingsbury, Kohl’s chief executive officer, in the announcement. “We see significant opportunity in the baby gear category.”

Last year, WHP opened a 10,000-square-foot experiential Babies R Us in a New Jersey mall, which includes a testing track for strollers and interactive nursery designs.

The Kohl’s shops will be less elaborate, sized at between 750 and 2,500 square feet. They’ll offer baby gear, activity, bath, furniture, feeding and safety products in ways that complement existing assortments.

The deal also makes Kohl’s the exclusive retailer for the Babies R Us at Kohl’s registry online.

Separately, the Menomonee Falls, Wisconsin-based company says sales slipped 1.1% to $5.71 billion, compared to $5.78 in the year-ago period, and dropped 4.3% on a comparable-store basis. It posted a net income of $186 million, compared to a loss of $273 million in the year-ago period.

The company says the partnership with Sephora continues to drive meaningful beauty sales growth.

“We believe Kohl’s is making progress on its initiatives,” writes David Swartz, an analyst who follows Kohl’s for Morningstar. Those include improving products, simplifying promotions and operating more efficiently. He does not expect to see sales or profit margins improve before 2025.

But he notes the company is fighting an uphill battle. While the sales results came in as forecast, the 4.3% fall in comparable sales marked the eighth consecutive quarter of declines. For the year, Kohl’s notched “flat comparable physical store sales in 2023, which was its best result since 2010, incredibly.”

Digital sales fell 15%.

“Although we are encouraged that the company is making changes,” Swartz adds, “we only forecast 1% annual same-store sales growth in the long run, given its challenged competitive position.”