Analyst: Kohl’s layoffs necessary after 2019 lag

Closing stores is Kohl's "last resort"

Kohl’s headquarters
Kohl’s headquarters in Menomonee Falls.

Last updated on February 18th, 2020 at 03:30 pm

Kohl’s Corp.’s recent announcement of 250 layoffs came with a disclaimer: “It is important to note that Kohl’s is in a position of financial strength.”

Retail industry analyst David Swartz isn’t so sure.

“If their business was in better shape, I don’t think they would have done this,” said Swartz, an equity analyst in the consumer sector at Chicago-based research firm Morningstar. He follows and reports on a number of national retailers including Kohl’s, Macy’s and Nordstrom.

The Menomonee Falls-based retailer on Wednesday released a statement saying it had laid off regional store leaders, merchants and other roles at its corporate offices as part of a restructuring aimed at creating “a more customer-centric focus” and position itself for “long-term success.”

The news came on the heels of what Swartz called a disappointing year for Kohl’s, despite launching several new brand partnerships, expanding its Amazon returns program and reducing the size of stores.

In January, the company reported that its comparable sales for November and December 2019 were down 0.2% from 2018. It also said it expected its full year earnings to be at the low end of its $4.75 to $4.95 per share guidance.

In the first nine months of last year, Kohl’s reported at 2.2% drop in net sales to $12.35 billion and net income decreased from $529 million to $426 million.

The recent layoffs and restructuring were likely not part of the plan or steps Kohl’s wanted to take, but “something they needed to do in response to the poor numbers in 2019,” said Swartz.

While Kohl’s greatest problem is driving foot traffic to its 1,150 stores locations, the company has refused to shut down stores like other big-box retailers that are experiencing the same issue.

“No retailer wants to close stores,” Swartz said. “It’s an admission that you’re failing, and it’s very painful. You have to lay people off, it’s very unpleasant.”

Making stores closures its last resort, Kohl’s is cutting costs and downsizing in other areas of the business. And since store traffic has been on the decline anyway, it makes sense that store manager positions would be eliminated, he said.

Kohl’s is scheduled to report is fourth quarter and full year results on March 3. Also in March, the company will hosts a gathering to update analysts on plans for improving business. The last analyst day took place in 2018, Swartz said.

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Maredithe has covered retail, restaurants, entertainment and tourism since 2018. Her duties as associate editor include copy editing, page proofing and managing work flow. Meyer earned a degree in journalism from Marquette University and still enjoys attending men’s basketball games to cheer on the Golden Eagles. Also in her free time, Meyer coaches high school field hockey and loves trying out new restaurants in Milwaukee.

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