For the quarter ending Feb. 1, net sales fell 9.4 percent to $5.2 billion. Comparable sales, which measure performance at stores open at least a year, dropped 6.7 percent. While the company’s gross margin improved slightly to 32.9 percent, operating income plummeted to $126 million from $299 million a year earlier.
Kohl’s projected another tough year ahead in a March 11 earnings call with investors. The company expects net sales to decline between 5 percent and 7 percent in 2025, with comparable sales down 4 percent to 6 percent. It forecasted diluted EPS of just $0.10 to $0.60, well below analyst expectations.
CEO Ashley Buchanan, who took over in January, acknowledged that Kohl’s had made strategic missteps that alienated some of its core customers. He laid out a plan to win them back by refocusing on key product categories, strengthening the company’s value pricing, and improving the shopping experience both in stores and online.
“We need to reprioritize our initiatives to better serve all of our customers, both new and existing,” Buchanan said on the earnings call. “When examining recent performance, we have fallen short of fully delivering what our customers want and expect from Kohl’s. Most of what we need to do is in our control and can be achieved by setting a clear vision and holding ourselves accountable to executing at a higher standard.”
Buchanan said Kohl’s had overemphasized attracting new customers while neglecting long-time shoppers. The company will now focus on popular in-house brands like Sonoma and Tek Gear while maintaining strong relationships with national brands.
The retailer is also adjusting its promotional strategy. Over the years, Kohl’s expanded the number of brands excluded from its popular coupon discounts, frustrating loyal customers. Buchanan said the company would reverse some of these exclusions to simplify the shopping experience.
Kohl’s executives pointed to broader economic challenges, particularly for middle-income shoppers. CFO Jill Timm noted that customers earning under $100,000 a year are facing pressure from higher costs on necessities like groceries and rent. She said these consumers are looking for value more than ever, and Kohl’s needs to ensure it meets those expectations.
The company also struggled in its digital business, where comparable sales plunged 13.4 percent in the fourth quarter. Executives said in the call that part of the decline was due to an inventory issue that temporarily suppressed online sales. Kohl’s said it has since fixed the problem and is seeing improvement.
To stabilize its finances moving forward, Kohl’s is cutting costs and reducing debt. The company plans to spend between $400 million and $425 million on capital investments in 2025 while lowering its dividend to $0.125 per share, down from $0.50.
Kohl’s stock fell after the earnings announcement as investors worried about the retailer’s ability to turn around its performance. Analysts questioned whether the company’s planned changes would be enough to regain lost business and improve sales.
“I want to set the expectations that this turnaround, while very achievable, is going to take some time,” Buchanan said. “Progress starts with the actions we are taking in 2025 to address opportunities and better serve our customers.”
