Kohl’s Suffers Major Losses Amid Alarming Consumer Trend

Kohl’s (KSS) , one of the largest department store chains found in malls nationwide, has managed to stay afloat for six decades as many of its peers such as Century 21, Lord & Taylor and Barney’s New York have recently filed for bankruptcy and disappeared from malls across the country.

While Kohl’s has managed to survive the Covid-19 pandemic, which caused many retailers to go out of business, it had a rough conclusion to 2024.

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Despite a bustling holiday season, Kohl’s suffered a significant dip in its sales and profits, and it’s sounding the alarm on the source of the problem.

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In Kohl’s fourth-quarter earnings report for 2024, the retailer revealed that its comparable sales decreased by 6.5% year over year.

Kohl’s operating income, the company's profit after expenses, also shrunk by a whopping 57% compared to the same quarter in 2023.

Shortly after the company reported its earnings on March 11, its stock declined by 20%.

Kohl's admits where it went wrong 

During an earnings call on March 11, Kohl’s CEO Ashley Buchanan emphasized that the company needs to “reprioritize” its initiatives as it has become too focused on serving new customers and not its “core loyal customers.”

“When examining recent performance, we have fallen short of fully delivering what our customers want and expect from Kohl's,” said Buchanan. “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.”

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Over the past few years, Kohl’s has focused on attracting younger shoppers by adding more Sephora and Babies R Us shops to its stores. 

It also revamped its selection of teen clothes by adding trendier pieces and expanded its home goods selection to attract young adults who are decorating their apartments for the first time.

During the fourth quarter, Kohl’s specifically faced challenges in its legacy home business, with sales of kitchen electrics, floor care, and bedding underperforming. Sales of accessories also remained flat.

Buchanan admitted during the call that reducing its coupon offerings was one of Kohl's mistakes that unintentionally drove away loyal customers.

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“Over the years, our list of excluded brands on our coupon has grown too large with the percent of sales that are excluded from coupons reaching an all-time high in 2024,” said Buchanan. “This has created confusion and frustration with our loyalist customer. We're in the process of reversing some of these exclusions to simplify the experience and allow our customers to shop with our promotional coupons more consistently.”

He also said that Kohl’s will be working on simplifying its price and value messages “by reducing the complexity” of its offers and will amplify great prices.

Kohl's flags concerning consumer behavior

Buchanan also acknowledged that consumers across the country are battling inflation and higher costs of living, which is also impacting sales as it’s causing consumers to seek more value.

“When you look at income level, if you're making less than 50, that consumer is pretty constrained from a discretionary standpoint,” said Buchanan. “If you're making less than 100, it's also pretty challenging. And you see that very clearly in the numbers. And obviously, we hear the inflation numbers, they're coming down or 2% to 3%, but they're still pretty elevated from – particularly from a grocery and rent perspective over the last few years because they haven't actually deflated.”

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Regarding the worrisome consumer trend, Kohl’s predicts that its comparable sales will decrease by 4% to 6% this year.

“As we approach 2025, our guidance outlook recognizes both the time needed to make the necessary changes as well as the uncertainty in the macro environment,” said Kohl’s Chief Financial Officer Jill Timm during the earnings call.

Kohl’s prediction comes after it announced in January that it laid off 10% of its corporate workforce and will close 27 underperforming stores by April this year.

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