Despite a loss of $15 million and a drop in sales, Kohl’s says its first quarter results were ahead of expectations and show signs of early turnaround efforts taking hold.
The Menomonee Falls-based retailer on Thursday reported net sales of $3 billion for the first quarter of fiscal 2025, down 4.1% from the same period last year. Comparable store sales were down 3.9% year-over-year. The company’s net loss of $15 million, or 13 cents per share, compares to a net loss of $27 million, or 24 cents per share, during the first quarter of 2024. Operating income, however, was up 39% at $60 million.
“Our first quarter performance was ahead of our expectations and the actions we are taking are starting to make progress with early signs of a positive impact,” interim CEO Michael Bender said in a statement.
Kohl’s attributes its better-than-expected performance to its latest turnaround strategy, which it began implementing earlier this year following a disappointing fiscal 2024 that saw net sales drop 7.2% and earnings fall 65%. The strategy, which aims to restore good standing with the traditional Kohl’s shopper while also maintaining and advancing inroads with new and younger customers, was introduced in March by then-CEO Ashley Buchanan, who was fired for cause earlier this month. The strategy will remain in tact under Bender, who noted Thursday that the company is not considering major changes to the previously announced turnaround plan.
Bender, who previously served as board chair, nodded to the shake ups of the past few weeks: “While change can be difficult, it also represents an opportunity to reassess and commit to a path forward.”
“The good news is, we already had that plan in place for 2025, and we’re making good progress against this plan,” he said. “Our plans, which are centered on customer priorities, have us working more collaboratively across the business, staying more accountable for incremental progress and communicating more transparently to effectively drive the work. As we navigate through this period of change, we’re committed to moving forward and showing up for our customers each day.”
Under its current turnaround plan, Kohl’s says its key areas of focus for 2025 include rebalancing its product assortment, reinforcing its reputation for value, and continuing to use its omnichannel model to provide a “frictionless” shopping experience.
“While we are in the early stages of our initiative, it is clear that the actions we are taking are beginning to resonate with our customers, and we are starting to build momentum in key areas,” said Jill Timm, chief financial officer. “However, I want to level set that this is a turnaround and will continue to take time, much of the work remains ahead of us.”
Timm noted several incremental adjustments the company has made in recent months to its store assortment for the purpose of both reinvigorating existing categories that were historically popular with longtime customers and continuing its investments in newer categories, such as Sephora and impulse.
As Kohl’s rolled out Sephora shop-in-shops across its footprint over the past three years, its fine jewelry — a popular category among loyal customers — was displaced from stores. The company reintroduced jewelry in the fall and rolled out 200 fine jewelry shops in select stores. As a result, jewelry sales were up 10% in the first quarter, driven mainly by Kohl’s card customers.
The women’s category continues to be a pain point for Kohl’s, with an excessive amount of new brands being added in recent years, leading to underperformance, said Timm. To mend this issue, Kohl’s is reducing the number of choices shoppers have in that category and focusing less on market brands and more on essentials, sportswear and proprietary brands. It also brought back women’s petits late last year after previously exiting that segment.
Kohl’s sees its private label brands across all categories as key to its identity as a value retailer and the company wants to take full advantage of that as consumers continue to looks for ways to save money in uncertain economic times.
We believe there’s a substantial opportunity for us to lean into our value oriented proprietary brands to offer more relevance, value, and quality to our customers.
“As we’ve begun to invest back in our proprietary brands, we have seen sequential improvement in the quarter over quarter performance with Q1 approximately 400 basis points better than Q4,” said Timm. “This improvement was driven by strong performance and key existing proprietary brands of Tek Gear and Flex in active, and Lauren Conrad in women’s. We will also look for opportunities to introduce new proprietary brands that fill a purpose for our customer and drive productivity within our merchandise portfolio.”
Navigating tariffs
Like many companies that source products from international markets, Kohl’s is keeping a close eye on increased tariffs imposed this year by the Trump administration and subsequent macroeconomic uncertainty.
Timm said the company has made an effort in recent years to diversify its sourcing in order to avoid relying too heavily on one county for its production needs. Those efforts are paying off now. The company did not adjust its guidance for the 2025 fiscal year and still expects a net sales decline of 5% to 7%, with comparable sales expected to also decrease by 4% to 6%. Operating margins are anticipated to range between 2.2% and 2.6%.
“Although tariffs remain a fluid and uncertain situation, the teams continue to work to reduce our exposure to high-tariff countries by leveraging our diverse factory network to move production, adjusting orders based on pricing elasticity analysis, and working closely with their supplier and vendor base to proactively manage any impact with the goal of continuing to drive value to our customers,” said Timm.
More articles about Kohl’s:
- Recently resigned Kohl’s board member raises concerns over governance
- Former Northwestern Mutual CEO named chairman of Kohl’s board
- Kohl’s fires CEO over conflict of interest, appoints interim leader
- Kohl’s chief technology and digital officer departs company
- Here’s how Kohl’s new CEO plans to execute a long-term turnaround
- Kohl’s saw sales, earnings fall in 2024
- Kohl’s cuts 10% of its corporate positions
