Kohl’s expects shop-in-shops to make up a quarter of sales over the next several years

Kohl’s, like a lot of department stores these days, is struggling. Its net sales were down 1.1% in Q4 and 3.4% for fiscal year 2023.

But inside Kohl’s stores at Sephora shop-in-shops, sales are booming. The partnership with the French beauty brand, which started in 2021, raked in more than $1.4 billion in sales in 2023. That marks a 90% jump in sales, and a 25% jump in comparable beauty sales.

That would be a success story in its own right, but Kohl’s now expects shop-in-shop partnerships to bring in a significant portion of its overall sales in the next several years.

CEO Tom Kingsbury told investors on Tuesday that its Sephora partnership will bring in more than 10% of net sales in 2024, and “based on their current trajectory, we now believe that we will surpass our previously shared goal of $2 billion in sales by 2025.”

On the same day, Kohl’s announced a new shop-in-shop partnership with Babies R Us, which Kingsbury said is one element of a “more than $2 billion sales opportunity over the next several years.”

So if all goes according to plan, shop-in-shops could contribute at least $4 billion in sales in the coming years—which would amount to nearly 25% of current sales.

Kohl’s ended 2023 with Sephora in 910 stores, including 860 large format and 50 smaller format shops, and it plans to open approximately 140 smaller shops in 2024.

The plan for Babies R Us is to open 200 stores 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,” Kingsbury said in the Babies R Us announcement.