Kohl's to close 18 stores, warns of flat sales

Feb 25, 2016, 12:00 PM EST
Source: Mike Mozart/flickr
Source: Mike Mozart/flickr

Kohl's will close 18 underperforming stores, and it warned of flat sales for 2016.

Reuters reports:

U.S. department store operator Kohl's Corp (KSS.N) forecast full-year earnings largely below analysts' average estimate and warned that sales could fall this year. The company also said it will close 18 underperforming stores in 2016, which represent less than 1 percent of total sales. Kohl's, which has 1,164 stores, expects to take a charge of about $150 million to $170 million related to the closures and its elimination of three senior positions, including chief digital officer, announced this month. Kohl's forecast earnings of $4.05 to $4.25 per share for the year ending January 2017, largely below the average analyst estimate of $4.24 per share, according to Thomson Reuters I/B/E/S. It also forecast full-year sales to fall or grow by only up to 0.5 percent. Kohl's said this month that sales at stores open at least a year rose 0.4 percent in the fourth quarter ended Jan. 30, and total sales rose only 0.8 percent as unseasonably warm weather hurt sales of cold-weather goods. Kohl's net income fell to $296 million, or $1.58 per share in the quarter, from $369 million, or $1.83 per share, a year earlier.

Fortune writes:

“While the decision to close stores is a difficult one, we evaluated all of the elements that contribute to making a store successful, and we were thoughtful and strategic in our approach. We are committed to leveraging our resources on our more productive assets,” Kohl’s CEO Kevin Mansell said in an interview. While the planned closings represent not even 1% of square footage, they represent a shift in Kohl’s strategy toward smaller stores and outlets. As first reported by Fortune in October, Kohl’s will open seven smaller stores of 35,000 square feet each, or just under half the size of a regular Kohl’s store, in 2016. The retailer will also expand its new chain of outlets called Off-Aisle, adding two locations to the pilot stores. What’s more, Kohl’s will open 12 Fila outlet stores to showcase that sportswear brand.

The Milwaukee-Wisconsin Journal Sentinel notes:

Like many retailers, Kohl's is wrestling with the growing shift of shopping to online outlets. Its digital business has been growing rapidly too, but not rapidly enough to lift its sales from the lackluster level of the last few years. Since 2011, Kohl's annual revenue has grown just 2.1%. The company has launched a sweeping series of initiatives — the "Greatness Agenda" — intended to lift its performance. While the effort has notched some successes, it appears to be well short of the pace needed to hit Kohl's stated goal of raising revenue to $21 billion in 2017, and investors have punished the firm. After Kohl's signaled earlier this month that its earnings would be less than expected, its share price dropped nearly 19% in one day. Kohl's will announce the locations of the stores being closed by the end of March, and will close them by the end of June. All employees at those locations will be offered jobs in nearby Kohl's stores "without exception," Mansell said.