Kohl’s is preparing for a challenging year, with anticipated declines in both sales and profits as the company works to rework its product mix and regain lost business. Under the leadership of new CEO Ashley Buchanan, who took the position on January 15, Kohl’s is prioritizing the rebuilding of relationships with its core customers. These customers were lost in recent years as the company expanded its space for impulse items, gifts, and home décor, diverting focus from legacy categories.
Buchanan outlined three key initiatives as part of Kohl’s recovery strategy. These tactical, short-term moves are described as “no-regret moves” and include:
- Regaining Traction in Lost Categories: Kohl’s plans to refocus on categories such as legacy home products, fine jewelry, petites, and intimate apparel, which have seen a decline as the company expanded into new product areas.
- Improving Assortment Clarity: The company will work on reinvigorating its private label brands to ensure a clearer and more defined assortment across all categories.
- Building on Momentum in Key Growth Areas: Kohl’s will continue to invest in categories where it has seen positive growth, including Sephora, home décor, and impulse items.
“It’s going to take some time,” Buchanan stated during the company’s Q4 review call. “This is a long lead time business – we’re looking at 9 months, in some cases, to get product in.” He further noted that the company likely wouldn’t see significant results from these changes until next year.
In its most recent fourth-quarter report, which ended on February 2, Kohl’s saw sales drop by 9.4% to $5.2 billion, with comparable sales falling 6.7%. While there was strong performance in impulse items, gifting, home décor, and baby gear, it was not enough to counteract weaker sales in bedding, kitchen electrics, and floor care.
Online sales were also down, dropping 13.4% for the quarter. A significant factor in the decline was the softness in legacy home categories, which are over-represented on Kohl’s online platform, according to CFO Jill Timm.
The company is also rethinking its approach to coupons, which have been criticized for being overloaded with restrictions. Timm explained that this shift has polarized Kohl’s core customer base. However, there has been positive traction with Sephora shop-in-shops, which have introduced a substantial number of new customers, approximately 35% of whom made additional purchases while in-store.
Looking ahead to 2025, Kohl’s faces both economic uncertainty and the challenge of overhauling its product assortment. The company’s 2025 outlook projects a 5% to 7% decrease in net sales, with comparable sales expected to fall between 4% and 6%. Diluted earnings per share are anticipated to range from $0.10 to $0.60, a significant drop from the $0.98 reported in 2024.
Kohl’s continues to focus on strategic adjustments to rebuild its business and strengthen its relationship with core customers. However, significant progress is expected to take time, and the company is preparing for a transitional year.
