Department store shopping isn't what it once was, thanks in large part to the downfall of malls and the rise of online retail. Kohl's is one of many businesses that reacted to the changing times, shifting to a "more focused lifestyle concept" in 2022. But even with a new company strategy in play over the past few years, it appears the retailer is still struggling to attract customers. New data shows that shoppers are abandoning Kohl's, with sales down for the eighth consecutive quarter, Reuters reported.
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In a press release outlining Kohl's financial results, the company announced that net sales from the fourth quarter of 2023 were down 1.1 percent compared with the same period the year prior. Comparable sales (same-store sales) were also down by 4.3 percent compared with the same time in 2022. For 2023 overall, net sales were down by 3.4 percent, while comparable sales decreased by 4.7 percent.
In addition, digital sales decreased by approximately 10 percent in the fourth quarter, Kohl's CEO Tom Kingsbury said during a March 12 earnings call. However, he pointed out that these sales improved as the quarter progressed. Revenue failed to meet expectations as well, coming in at $5.71 billion as opposed to $5.73 billion, Yahoo Finance reported.
According to Bloomberg, the retail sector as a whole is struggling with economic uncertainty created by higher interest rates and inflation. But while some big names like Gap and Abercrombie have maintained customer loyalty, Kohl's—like its competitors Macy's and Nordstrom—is struggling with its customer base. Instead of heading to department stores or "lifestyle" stores, bargain shoppers and those on a budget are taking their business to off-price retailers like T.J. Maxx, Marshalls, and Burlington, Reuters reported.
In light of the results, Kohl's shares dropped in premarket trading on March 12, Yahoo Finance reporter Madison Mills said in a Yahoo Finance Live appearance.
"Consumers are not continuing to spend at that store, and that is why this earnings print did not get a good reception from the Street," Mills said. "We saw that same-store sales missed estimates and their forward guidance was conservative, so a couple of fundamentals there for the business not doing so well."
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Unfortunately for Kohl's, experts say it's unclear whether customers will return. Mills pointed out that the "big question" surrounding the retailer is whether it will become a "go-to store in an environment where we're continuing to see people have this strength in their spending." (As of mid-March, it appeared that customers were spending, regardless of whether they could afford to, or whether it required them to pick up another job, Mills explained.)
"They're not spending that money at Kohl's, and that is going to be a problem for this brand moving forward, particularly when we're seeing market share get taken up by the likes of those big retailers like a Walmart and a Target still, moving forward," she said.
All that said, Kohl's has a positive outlook moving forward in 2024—and plans to (hopefully) drive sales. In the press release, Kohl's outlined plans to allocate approximately $500 million to expand its partnership with Sephora.
In addition, Kohl's is launching a new partnership with Babies "R" Us to "expand our presence in the baby category," Kingsbury said on the earnings call. The retailer plans to open Babies "R" Us shops within 200 Kohl's stores this fall.
"Looking ahead, we are incredibly focused on delivering comparable sales growth in 2024. Our strategic initiatives are positioned to build momentum and contribute more meaningfully, and we will partner with Babies 'R' Us to meaningfully expand our presence in the baby gear category which represents a compelling white space opportunity for Kohl’s," Kingsbury said in the press release.
He concluded, "Through our collective efforts Kohl’s is becoming more relevant to customers, which strengthens our conviction in our longer-term opportunity."
