The Best and Worst of Kohl’s - A Tale of Two Store Visits
KSS Stock Still In Free Fall - But What’s Really Going On In-Store?
No matter how you slice it, Kohl’s has not had a good year. Heck, Kohl’s has not had a good last five years.
Tom Kingsbury will step down as Kohl’s CEO on January 15, at which point Ashley Buchanan, the current CEO of Michaels, will take the reins.
Kingsbury will remain with the company for a brief period in an advisory capacity before retiring in May 2025.
Results
Earnings were reported on November 2, 2024, follows were some highlights.
Nine Months Fiscal Year 2024 Results
Gross margin as a percentage of net sales was 39.4%, an increase of 42 basis points.
Selling, general & administrative (SG&A) expenses decreased 3.4% year-over-year, to $3.8 billion.
Operating income was $307 million compared to $418 million in the prior year.
Net income was $61 million. This compares to net income of $131 million in the prior year.
High points included Kohl’s key growth areas: Sephora; home decor; gifting; and impulse.
And, Kohl’s benefited from the opening of Babies “R” Us shops in 200 Kohl’s stores. But this upside was not enough to offset the ‘drain’ in the “core business”.
Store Visits
Over the last two months, I visited two different Kohl’s.
One was in Lafayette, Colorado, prior to Black Friday. The second Kohl’s I visited was in Westminster, Colorado, on Christmas Eve.
The Lafayette store was clean and well-lit, but grossly understaffed - no one was in the fitting rooms or even near them to help me, and there was virtually no staff - anywhere - on the sales floor.
The Westminster location was fully staffed, if not overstaffed with seasonal labor, but felt ‘cramped’ with the density of clearance items on tightly packed racks. Fixtures were far too full, and there were racks for as far as the eye could see.
No one asked me if I needed help in either store, even on Christmas Eve with staff everywhere.
New CEO
As incoming Kohl’s CEO Ashley Buchanan takes the helm early next year, we will be watching closely to see what changes he makes.
Buchanan is currently CEO of Michaels Stores. Michaels operates on a high-volume, grocery-like business model (highly promotional; think: lots of coupons).
Prior to Michaels, Buchanan was COO of the Walmart eCommerce business.
A smattering of pictures, with context, from the two Kohl’s store visits follow.
Pre-Black Friday
Christmas Eve
Until next time everyone, happy retailing!
Agreed and well said Erik, and they obviously got a pop from opening Sephora stores in stores.
What is you’re thinking regarding the babies r us in-store collab?
Kohl's in many ways is a victim of its own success story. They lived off their innovation of free standing department stores in the suburbs as the population moved out of the cities. Everything was great until they spread across the country and the movement settled out. Then they started playing with the formula and ended up alienating their core. Moving back later to their branded strategy confused a lot of people. I think Ashley has a good chance to build on some of the changes and if he concentrates on core strategies they will continue to be a profitable and well run company. With that said, they will never be the darling they where as they we spreading the "new" model across the country. Like Walgreens who at one point was opening a store every 17 hours, growth in new stores camouflages a lot of poor business practices. All that becomes exposed when saturation is reached. If inflation gets under control there will still be a new generation of shoppers that will be excited to stack coupons and Kohl's cash if for no other reason than it's not Walmart.