Kohl’s lost $163 million in 2020

Eyes future growth in beauty, active categories

Kohl's Corp. headquarters in Menomonee Falls
Kohl's Corp. headquarters in Menomonee Falls

Last updated on March 3rd, 2021 at 01:50 pm

Menomonee Falls-based Kohl’s Corp. is looking forward to better days, after losing $163 million in 2020 due to challenges brought on by the COVID-19 pandemic.

By comparison, the retailer recorded earnings of $691 million for fiscal 2019.

Kohl’s on Tuesday reported full year net sales were down 20% at $15 billion, but it expects a mid-teens percent increase in 2021 net sales compared to 2020.

Kohl’s finished fiscal 2020 with a loss of $1.06 per share, compared to earnings of $4.37 per share for fiscal 2019.

Total revenue was $15.9 billion, down 20% for the year.

The retailer’s fourth quarter results are a better indicator of gradual recovery. While net sales and total revenue were both down about 10%, Kohl’s has pointed to quarterly improvement: Q3 of 2020 saw a 13.3% decrease in comparable sales and total revenue was down 14%.

Meanwhile, fourth quarter earnings totaled $343 million, or $2.20 per share, up 29% from $265 million in the previous fourth quarter.

Digital sales for Q4 were up 22% over last year, accounting for 42% of net sales versus 31% last year. That growth is expected to continue in the front half of the year as the pandemic keeps customers at home.

“After an extraordinary year managing through the pandemic, we ended the year in a very solid financial position, and we enter 2021 with strong momentum,” said chief executive officer Michele Gass in a statement.

Kohl’s finished 2020 with $2.3 billion in cash, up more than $1.5 billion from the previous year.

During the Q4 earnings call Tuesday morning, Gass said she’s “extremely confident” in the company’s outlook. Financially, that includes achieving an operating margin of 4.5% to 5.0% and earnings per share of $2.45 to $2.95, as well as resuming its capital allocation strategy. The long-term goal is to expand operating margin to 7% to 8% by 2023.

The active, casual and beauty categories remain central to Kohl’s growth aspirations, as part of a long-term strategic plan, announced last October.

The company plans to grow its active category to 30% of total sales (from 20% currently), with expanded store space and new brands such as its own private label FLX, Calvin Klein and Eddie Bauer.

Kohl’s partnership with San Fransisco-based beauty retail giant Sephora is set to launch online and at the first 200 department store locations in August, expanding to 850 stores by 2023. Gass called the move a “game changer” for Kohl’s, saying it will create a “halo effect” across the entire store and drive sales in other categories, especially women’s, which has also undergone a revamp.

In tandem with the ‘Sephora at Kohl’s’ buildouts, the retailer plans to “refresh” 675 of its store locations over the next two years.

Kohl’s continues to see value in “omni-channel services” such as curbside pick-up and the Amazon returns program, which drove at least 2 million new unique customers in 2020 — a third of whom are millennials, said Gass.

Despite any progress Kohl’s has made over the past year navigating the pandemic, the company was recently criticized by a group of activist investors who want to shake up the retailer’s board of directors in an effort to improve performance. The group last month released a 27-page open letter, which nominates nine replacement candidates for Kohl’s 12-person board and includes plan to grow sales, cut expenses, adjust executive compensation and proposes a large-scale sale-leaseback program for the company’s real estate assets.

Kohl’s pushed back, doubling down on its current initiatives.

“We reject the investor group’s attempt to seize control of our board and disrupt our momentum, especially considering that we are well underway in implementing a strong growth strategy and accelerating our performance, and we have refreshed half our board with six new independent directors since 2016,” the company said in a statement.

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Maredithe Meyer
Maredithe Meyer covers restaurants, retail, tourism, and sports and entertainment. She joined BizTimes in 2015, previously as an intern reporter. She earned a degree in journalism from Marquette University in 2017. When she's not on the job, Maredithe coaches field hockey and loves exploring her favorite city on earth, Milwaukee.

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