About a year and a half ago, Kohl’s was talking about expanding its store fleet, and CEO Tom Kingsbury said all locations were profitable. So far, the company has been true to its word: In 2023, Kohl’s opened six new stores, relocated one and closed two, according to its proxy statement from May. This has been in stark contrast to Macy’s, which in recent years has only added to its closure count.
However, Kohl’s may need to reconsider its stance.
During an earnings conference call this week, Kingsbury owned up to the fact that many of Kohl’s turnaround tactics have failed and that the retailer is now walking them back. In January, Michaels CEO Ashley Buchanan will replace Kingsbury as CEO.
Neither he nor Chief Financial Officer Jill Timm directly addressed questions about the possibility of closing stores, though. The company didn’t immediately respond to questions from Retail Dive about potential store closures.
Timm did tell analysts that “we're always evaluating our fleet to optimize it” and that, because the vast majority are profitable, considering closures is “a difficult financial decision.” She also said that Kohl’s has an advantage being in convenient, off-mall locations and that the company generates “a lot of cash from our stores.”
Still, while “over 90% of our stores are still four-wall cash-positive,” according to Timm, that means about 10% of its 1,174 stores are not.
She also acknowledged that Kohl’s stores are spacious, on average over 80,000 square feet, which the retailer has filled with partnerships with “Babies R Us and some other brands without having to really give up floor space.” The company will also be using some space for its private labels, after realizing that the decision to emphasize name brands over owned brands was a mistake.
Some analysts believe that Kohl’s footprint could shrink considerably, however.
The Kohl’s brand “simply hasn’t resonated like it has in the core Midwest markets,” with average sales per store dragged down by newer locations that opened outside that home area in the past 15 years, according to Evercore ISI analysts led by Michael Binetti. More than 300 stores seem to have been “consistently passed up for reinvestment,” yet “Kohl’s has been reluctant to close,” they also said.
“We think Kohl’s may have to look at its first largescale store closure program in 2025,” they said.
