Kohl’s Corp.’s sales fell in the past quarter as the pandemic continues to roil the retail world, but chief executive Michelle Gass sees plenty of reason for optimism.

The retail chain’s digital revenue remains elevated and profitability is improving, Gass said Thursday in an interview. And while the company’s preliminary fourth-quarter results showed an 11 percent decline in same-store sales and 10 percent drop in total revenue, the performance was better than it was during the height of the pandemic.

“While sales are still down we’re seeing sequential improvement from the last few quarters amidst the pandemic,” she said. “In a time like this where there’s so much volatility with the consumer, it’s how the organisation has been managing the business.”

The results highlight the challenges of operating retail stores in the pandemic. After a difficult 2020 marked by broad economic shutdowns, retailers were showing signs of recovery just as Covid-19 outbreaks flared up again in recent months.

Companies like Kohl’s relied on socially distanced sales methods — such as online orders and curb-side pickup — to carry them through the crucial holiday season. The pickup in digital sales has also led to higher shipping costs. Gass said that’s likely to continue, though the department-store chain has initiatives in place to help offset those headwinds.

Kohl’s shares jumped 7.1 percent at 10:43AM in New York.

The retailer expects to report diluted earnings per share of $1 to $1.05 in the fourth quarter ended January 30, before accounting for an impact from tax planning strategies, it said in a statement. Analysts had anticipated adjusted earnings of 70 cents a share, according to the average estimate compiled by Bloomberg.

Expense Management

“That’s directly correlated to the efforts we have in place with gross margins and expense management,” Gass said. Digital sales climbed more than 20 percent, according to the preliminary results. The company said it will host a conference call for full fourth-quarter earnings on March 2.

During the holidays, Kohl’s shoppers gravitated to the items that have proven popular throughout the pandemic, including active and home products. Its beauty unit, which will expand further in the fall with the opening of Sephora shop-in-shops, had a strong performance during the fourth quarter, Gass said.

“I feel like we’re really set up as we head into 2021,” she said. “We’re all looking forward to the day when there’s a greater degree of normalcy.”

By Richard Clough and Jordyn Holman.