Not long ago, unlike its competitor Macy’s, Kohl’s had ambitious plans to grow its store network. Analysts now believe those plans may shift significantly.
Published on December 3, 2024
A little over a year ago, Kohl’s was optimistic about expansion, with CEO Tom Kingsbury claiming every location was turning a profit. The company kept up with that optimism in 2023 by adding six new stores, relocating one, and closing two, as per its proxy filing from May. This approach has stood in clear contrast to Macy’s, which has continually shut down locations over recent years.
However, Kohl’s might have to rethink its position.
During an earnings call this week, Kingsbury conceded that many of Kohl’s strategies to revive sales had fallen short, leading the company to pull back on several initiatives. Ashley Buchanan, currently the CEO of Michaels, is set to replace Kingsbury as the new CEO in January.
Neither Kingsbury nor Chief Financial Officer Jill Timm provided direct answers to inquiries about the possibility of closing stores. When questioned, the company did not offer immediate comments regarding store closures.
Timm explained to analysts that the company regularly reviews its store network to ensure it’s operating efficiently. While she acknowledged that most stores are profitable, closing some of them is “not an easy financial decision.” She also highlighted Kohl’s off-mall locations as a competitive advantage, noting they bring in significant revenue.
Even so, Timm revealed that approximately 10% of Kohl’s 1,174 stores aren’t generating sufficient revenue, despite the fact that “over 90% of our locations remain profitable.”
She also pointed out that Kohl’s stores are typically large, averaging over 80,000 square feet. This space has been utilized to accommodate partnerships with brands like Babies R Us without reducing the retail area. Additionally, Kohl’s is shifting focus back to its in-house brands after realizing that prioritizing third-party brands over private labels was a misstep.
Still, some analysts believe Kohl’s may need to downsize significantly.
According to Evercore ISI, led by analyst Michael Binetti, Kohl’s has struggled to maintain the same level of success in regions outside the Midwest, where its roots and loyal customer base lie. Stores opened outside this core area over the last 15 years have underperformed, dragging down average sales. More than 300 of these locations appear to have been consistently overlooked for investment, and yet the company has resisted closures.
“We believe Kohl’s could initiate its first large-scale closure program as early as 2025,” the analysts predicted.
Save More When You Buy a Full Truckload of Merchandise
When buying a Full Truckload of merchandise you save more money than buying just a single Clearance Gaylord box of Goods.
