Smaller stores, outlets and online sales part of new plan.
Kohl’s announcement that it’s closing 18 stores might seem like a drop in the bucket compared with other major retail closing news. However, the move represents a dramatic strategy shift for the 52-year-old retailer. The closings are just one plank in an overall plan to bolster sluggish sales and earnings while keeping the chain relevant.
Hampered by stalled revenues, Kohl’s is adopting a new strategy designed to enhance both sales and profitability. The 18 stores slated for closing represent only about 1% of the company’s overall sales. Shuttering them is anticipated to produce an annual savings of about $55 million, better positioning the chain to explore new avenues of revenue. Despite the announced closings, Kohl’s brick-and-mortar roster of 1,164 is actually anticipated to grow by three stores in the coming year. The growth includes the addition of seven new smaller format stores as well as new locations for Kohl-owned Off/Aisle and Fila.
Kohl’s announcement of its new strategy and the closings came during a company conference call with its investors focused on fourth-quarter earnings. CEO Kevin Mansell was able to report earnings per share of $1.58, which beat Wall Street estimates of $1.55, but the accomplishment was clouded by stalled earnings and a track record of missed initial earnings per share guidance in three of the past four years.
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Kohl’s store closings come in a climate where many major retailers are shuttering brick-and-mortar locations. Finish Line and Gap have slated more than 100 stores for closing. Macy’s, Sears and J.C. Penney also have announced closings in the coming year.
Hoping to buck the large-scale closing trend, Mansell laid out Kohl’s “Greatness Agenda” for investors. The agenda includes not only the closings, but a series of other initiatives meant to bolster performance. Part of the plan involves a redoubling of efforts in the online arena. Kohl’s experienced a 30% rise in online sales even as store sales fell by 5% in the fourth quarter. In addition, seven smaller scale stores at 35,000 square feet will be added to the company’s lineup, as will 12 Fila apparel and footwear stores in outlet malls. Kohl’s Off/Aisle discount store footprint will also grow by two stores in the coming year. To drive the plan forward, Kohl’s anticipates a capital spending increase of 20%, or about $825 million, in the coming year.
Whether Kohl’s strategy shift will pay off in increased earnings remains to be seen. Even so, Mansell promised investors that “this is not a company that’s pulling back.”
Kohl’s intends to announce its 18 locations for closing by the end of March. Employees at affected stores will be offered jobs at other company stores “without exception,” Mansell promised.
