Kohl's in Crisis: Can the Retail Giant Recover from its Customer Exodus - Stock Down 35% - Part One

As 1.3 million customers vanish, can Kohl's recover from its sales slump and regain comps? The shorts have it! Institutional investors own it!

Nov 12, 2024

According to Neil Saunders of GlobalData, as reported by the Wall Street Journal, Kohl's has suffered a staggering blow: a whopping 1.3 million customers have abandoned ship over the past five years.
The million-dollar question: where did they flee to? Some likely defected to discount darlings, like TJX, while others may have been lured away by Target or Walmart. The harsh reality is, that in today’s fickle retail environment, the customers may not return.

My interest in Kohl's was sparked by an exchange I had with a friend, a retired SMU business school professor, who resides in Plano, Texas.

During our recent chat, he mentioned that every time he visits his local Kohl's, he's struck by the vacuousness of the store. I am not a Kohl’s shopper, so I decided to take on the ‘Kohl’s beat’, to see what was going on.

Multi-Part

This is Part One of our two-part series.

In the first part, we'll look at recent financial highlights, that will leave you wondering about Kohl's future.

In Part Two, I’ll share thoughts from a recent store visit, where the real story unfolds. Sneak peek - I was pleasantly surprised.

1 in 3 shares of Kohl’s (ticker KSS) are shorted

Recent Quarter Highlights and Related

In the most recent quarter (fiscal Q2, ended August 3, 2024), Kohl’s reported the following:

Net sales decreased 4.2% and comparable sales decreased 5.1%
Gross margin increased 59 basis points
Diluted earnings per share of $0.59 versus $0.52 in the prior year
Inventory declined 9%
Committed to returning capital to shareholders through the dividend and further strengthening balance sheet
CEO Kingsbury underscored digital sales outperformed store sales in the second quarter
Sephora remains a key strategy, along with home decor, gifting and impulse. These areas, along with a Babies R Us partnership, aim to boost sales growth.
Babies R Us has begun rolling out shops at 200 Kohl's stores nationwide.

CEO Tom Kingsbury had committed to boosting comparable store sales, but the latest quarter fell short of that goal. The market's response? Underwhelmed

The stock is down 35% year-to-date.

Kingsbury said, “During the second quarter, our customers exhibited more discretion in their spending, which pressured our sales even as customers transacted more frequently. This overshadowed strong performance in our key growth areas, including Sephora, home decor, gifting, and impulse.”

SEPHORA IN-STORE

The Sephora Footprint: about 10% of total store square footage, North Denver store

As per Madison Mills, Yahoo Finance, “Unfortunately for Kohl's, experts say it's unclear whether customers will return. They're not spending that money at Kohl's, and that is going to be a problem for this brand moving forward, particularly when we're seeing market share get taken up by the likes of those big retailers like a Walmart and a Target still, moving forward," she said.

Poll

On the heels of these data - and that conversation - I did a store visit to my local Kohl’s. In part two, I will share my observations. Until then, happy retailing!

*For those in the retail and tech spaces, here are ways I can help:

1. I have been published in the Harvard Business Review on the topic of C-Level engagement. If you need help fine-tuning client material, such as proposals and campaigns, for maximal impact, to appeal to a C-level audience, I can be reached at tdecicco@konposit.com.

2. My forte is sales. For tech firms looking to expand in the U.S.market, I can be reached here.

3. Promote your firm by sponsoring this newsletter. Ads are placed in-article. Readership includes retail and tech industry executives, analysts, consultants, and academia.