Grappling with the continuous struggle to attract new customers while maintaining its loyal base, Kohl’s Corp. is looking at a renewed, long-term turnaround effort for 2025 and beyond.
Parts of that plan were outlined Tuesday by the Menomonee Falls-based retailer’s new CEO Ashley Buchanan, who took the helm in mid-January and addressed analysts and investors for the first time Tuesday during Kohl’s fourth quarter and full year earnings call.
Although it met revenue expectations on the whole, 2024 was a disappointing year for the the company, which saw net sales drop 7.2% to $15.4 billion and earnings fall 65% to $109 million, or $0.98 per share. Store sales were down 5.6%.
For the fourth quarter, net sales were down 9.4% at $5.2 billion and earnings were down 74% at $48 million, or $0.43 per share. In addition, store sales in Q4 dropped by 3.1%, and digital sales were down 13.4%.
Kohl’s had better success in keeping costs at bay this year, with selling, general and administrative expenses decreasing 3.7% for the full year and 4.5% for the fourth quarter, which the company attributes to “tightly managed expenses across the organization, primarily in stores, marketing, and supply chain.”
Another bright spot, the company continues to see a return on its partnership with Sephora, which, as of Q4, operates locations at more than 1,000 Kohl’s stores across the country and is tracking a $2 billion sales goal by the end of this year. In the fourth quarter, comparable sales from Sephora at Kohl’s were up 13% year-over-year.
“It’s a new customer coming in and we see that customer about 35% of the time buying something else while they’re at Kohl’s,” said chief financial officer Jill Timm.
In introducing his turnaround strategy, Buchanan pointed out the drastic amount of change that has been implemented throughout the Kohl’s organization over the past few years — from the rollout of Amazon Returns and Sephora at Kohl’s to the launch of new proprietary brands and marketing strategies — and acknowledged these changes, made in an effort to appeal to younger generations and attract new customers, have contributed to an erosion of the company’s core customer base.
“We need to reprioritize our initiatives to deliver on these key tenants to better serve all of our customers, both new and existing,” said Buchanan. “When examining recent performance, we have fallen short of fully delivering what our customers want and expect from Kohl’s. Most of what we need to do is in our control and can be achieved by setting a clear vision and holding ourselves accountable to executing at a higher standard.”
He noted three objectives on which the strategy will focus:
- Offer a curated, more balanced assortment that fulfills needs of all customers.
- Reestablish Kohl’s as a leader in value and quality.
- Enhance Kohl’s omnichannel model to create a frictionless shopping experience.
In its guidance for the 2025 fiscal year, Kohl’s projects 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%.
“As you will see from the financial guidance we’re giving today, I want to set the expectations that this turnaround, while very achievable, is going to take some time,” said Buchanan. “Progress starts with the actions we are taking in 2025 to address opportunities and better serve our customers. This marks the initial phase of actions from our ongoing assessment.”
