Kohl's May Be Cutting Back on Discounts for Shoppers

Kohl's sales dropped over the holidays.

The winter holidays are usually a busy time for retailers, but Kohl's struggled to pull in shoppers this time around, CNN reported.

On March 1, the company released the financial results for its last quarter and entire 2022 fiscal year. According to the report, Kohl's fourth-quarter net sales fell by 7.2 percent compared to same time the year prior, while its comparable sales were also down by 6.6. percent.

Inflation has changed what shoppers are buying, which has put this retailer in a difficult spot. "Kohl’s is caught in an uncomfortable middle ground between discount and high-end retailers, which leaves it particularly vulnerable to consumers’ shifting spending patterns,” Insider Intelligence retail analyst Zak Stambor said in a note to clients, per CNN.

The retailer is planning a transformation as a result.

To offset these surprising losses, the company is looking to shake up its operations. During an earnings call on March 1, Kohl's CEO Tom Kingsbury said he believes that the retailer has a "substantial opportunity to make a difference in the retail landscape," but that there is work to be done.

According to Kingsbury, Kohl's has "lost some ground" when it comes to connecting shoppers to certain categories.

"Candidly, I know we can do better," he said. "To reach our full potential, we will refine our strategy and reestablish merchandise disciplines with a customer center focus across the organization. This will sharpen our positioning with customers, allow us to capitalize on new opportunities and drive greater efficiency."

Kohl's shoppers may soon see fewer discounts.

Kohl's is looking to simplify its value strategies as part of its overall transformation—which is likely to result in fewer discounts for its shoppers.

"In today’s inflationary environment, it is very important that Kohl’s stands for value, both in our pricing and in our messaging. We provide great value to our customers through Kohl’s Cash, our rewards loyalty program and our Kohl’s Card," Kingsbury explained during the call. "That said, we know that our promotional strategy at times can be a disadvantage to Kohl’s when compared to our competitors' price-focused strategies."

The retailer will accelerate efforts to reduce its "reliance on general promotions" in 2023 by simplifying layered discounts, according to the CEO. That would mean not having multiple discounts for the same product.

"We’re going to be more targeted in a lot of our promotions as well. Right now, we have a lot of general promotions, general audience promotions—which we’re going to look at that," Kingsbury explained.

If you're a fan of Kohl's Cash, however, there's no cause for concern. "We’re not going to back off of Kohl’s Cash. That’s a very important component to the value equation overall," he clarified.

Best Life reached out to Kohl's for more information on what these changes would look like for shoppers, and will update the story with their response.

The CEO said changes will be made over time.

Discounts aren't going to suddenly disappear. According to Kingsbury, the company's process to make pricing and promotions less complex is in "test mode overall," meaning they will be making small steps to begin with and using the results to determine how they're going to move forward.

"Whatever we do, we’re going to be very thoughtful and do everything at the appropriate pace," he explained.

Kohl's larger transformation won't be a quick turnaround, but the company is hoping it will reverse its current financial standings over time.

"Through these important actions, I am confident that we have the right plans, organizational structure and team in place to drive improved more consistent sales and earnings performance over the long term," Kingsbury told analysts during the call. "That said, I want to be realistic in setting expectations. The full impact of our efforts will take some time. It won’t happen overnight."