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Ashley Buchanan, CEO of Kohl's.
Photo credit: Kohl's[/caption]
A new fiscal year and new leadership at the helm means a refreshed turnaround strategy for Menomonee Falls-based retailer
Kohl's Corp., which has outlasted many of its now-bankrupt brick-and-mortar peers but has long struggled to keep up with today's rapidly changing consumer trends and expectations.
The company closed out fiscal 2024 with net sales and net income falling 7.2% and 65%, respectively, compared to fiscal 2023. Full-year comparable sales were down 6.5%. Contributing to the year's poor performance was a fourth quarter that -- despite the holiday season -- saw net sales decrease 9.4% and comparable sales decrease of 6.7%. Digital sales for the quarter were down 13.4%.
Kohl's is under pressure to recover from a tough year and achieve better results, and new CEO
Ashley Buchanan says he is up for the challenge. Having worked in corporate retail for nearly two decades, including the past five years as CEO of The Michaels Companies, Buchanan told analysts and investors during Kohl's earnings call Tuesday that he "loves the fast pace of the retail industry and the challenge of meeting changing customer expectations during the ongoing retail evolution."
"To stay ahead, we need to take a data informed approach to listen to the customer and meet them where they desire to be met," he added.
That customer-focused mentality shows up in Buchanan's long-term turnaround strategy for Kohl's. One of his main priorities is re-engaging with the chain's core customer.
In an effort to attract new and younger customers, Kohl's has implemented numerous changes in recent years to its brand assortment, promotions and store layout to make way for the national rollout of Sephora at Kohl's as well as a heavier focus on "key growth categories" such as home decor and impulse. As a result, some of its mainstay categories, like woman's apparel, and proprietary labels fell by the wayside, neglecting customers who had grown accustomed to finding what they needed in those categories at Kohl's.
“When examining recent performance, we have fallen short of fully delivering what our customers want and expect from Kohl’s," said Buchanan.
With projections of a comparable sales decline of 4%-6% in 2025, Buchanan isn't promising rapid improvement, but he outlined the "initial phase of actions" the company will take this year.
'Offer a curated, more balanced assortment that fulfills needs of all customers'
As Morning Star analyst David Swartz wrote in response to the company's latest earnings, Kohl's has struggled for years to "find the right promotional strategies and mix of private-label and national brands." 2024 was no different but it was a year in which Kohl's recognized it had placed too much focus on new, high-growth categories and not enough focus on its bread and butter, and then began to rebalance its attention.
Going forward, Kohl's plans to continue recovering ground in neglected categories, namely fine jewelry, woman's petites and intimates and legacy home, while building momentum in home decor, impulse and Sephora -- which generated a 13.4% same-store sales increase in Q4.
'Reestablish Kohl’s as a leader in value and quality'
Kohl’s has worked to evolve and attract new customers while balancing a long-held reputation for value, with its Kohl’s Cash, coupon mailers, promotions and a loyalty Kohl's Rewards program that has grown to 30 million members since its 2014 launch. Proprietary brands, like Sonoma and Flex, are a big part of Kohl's value offerings and Buchanan sees opportunities to "unlock the full potential" of the proprietary brand portfolio to regain favor with loyal customers.
"We will build on brands like Sonoma Flex, enhancing our current brand portfolio to become a destination for affordable quality products that you can only get at Kohl’s. We will also look for opportunities to introduce new products that fill a purpose for our customer and drive productivity with our merchandise portfolio," he said.
In addition, Kohl's is currently in the process of re-evaluating and reducing the mix of brands that are excluded on Kohl's Cash and other promotional deals.
"Over the years, our list of excluded brands on our coupon has grown too large with the percent of sales that are excluded from coupons reaching an all time high in 2024. This has created confusion and frustration with our loyalest customer," said Buchanan.
'Enhance Kohl’s omnichannel model to create a frictionless shopping experience'
Adopting an omnichannel model -- which melds the traditional in-store shopping experience with modern-day e-commerce -- has been a centerpiece of Kohl's growth strategy since 2010 and has led to the launch of initiatives like Amazon Returns and the development of new e-commerce fulfillment centers.
Buchanan wants to make shopping at Kohl's -- whether it's in-store or online -- even more seamless for customers under the omnichannel model. This includes consistently stocking shelves with high-volume basics and essentials and improving category placement throughout the store.
Buchanan noted the need for store and digital business "to work together in tandem," and hinted at opportunities the company is pursuing to better leverage technology.
"While our store and digital business do have some synergies, there are many aspects in how we operate that we can do better. We have identified opportunities in our omnichannel business and some of the initial work is already underway," said Buchanan.
