Kohl’s Reports Unfavorable Year-End 2022 Results

Tom Kingsbury, the new CEO of Kohl’s met with analysts to discuss the results of his company. It was clear that he had rolled up his sleeves to change the momentum of the company in the future. The company reported a drop in revenues of 7.7% in the fourth quarter 2022. For the quarter the company reported a net loss of $302 million ($2.49) a share compared to a gain of $299 million or $2.20 per diluted shares in 2022

Fiscal year 2022 results were equally difficult. Net sales decreased 7.3% to $17.2 billion. Gross margin was 33.2% as a percentage of total revenues. SG&A expense increased 2.0% year over year to $5.6 billion. Net loss was 19 million ($0.15) per diluted share. This compared to 2021 income of $938 million, or $6.32 per diluted share. Operating cash flow was $282 million.

Kingsbury said that the company has already taken some actions that will are expected to lead to major improvement. One is the appointment of Dave Alves as president and Chief Operating Officer (COO), and also Nick Jones as Chief Merchandising and Digital Officer. Both men will report soon to fill the positions.

Beginning in the fourth quarter the company took some proactive measures to clear inventory, and he promised that the company will plan inventory down to mid-single digits going forward. The merchandising and marketing departments were realigned in January 2023.

In Kingsbury’s refocusing the strategy of the company he will continue to stress clear value messages as well as Sephora. The latter brings young people to the stores. 650 Sephora units are now open, 200 will open during the current second and third quarters for a total of 850 units, They are 2,500 square feet in size. In addition 50 smaller Sephora units will open and Kohl’s will, by 2025, have a Sephora unit in all their stores.

Kingsbury also reflected on customers needs and wants and that the company will strive to have merchandise that is in demand. 30% of the company’s sales are digital and 55% of the company sales are national brands.

Sales in the fourth quarter were down 7% due to reduced traffic and lower units per transaction. Sales were down in the high single-digits for national brands, while private labels including Sonoma, Croft & Barrow, Tek Gear and Lauren Conrad had relatively flat sales.

The company anticipates lower freight costs and other expense savings in the coming year. They will also test every day low price policy selectively to see whether Kohl’s customers like the idea. As a counterpoint, management expects that merchandise costs will still rise in the current year.

Kingsbury said: “Kohl’s fourth quarter results reflect meaningful proactive measures we took to better position the business for 2023 as well as sales pressure driver by the ongoing inflationary environment. Kohl’s has solid foundation and a highly motivated team with a set of priorities to capitalize on what I see as a sustaining difference in the retail landscape.”

Kingsbury continued: “Our efforts to drive the business are already underway, we are refining our strategy and re-establishing merchandise disciplines with focus a customer-centric focus across the organization. I am confident that our efforts will drive improved and more consistent sales and earnings performance over the long term.”

POSTSCRIPT: Management project earnings for 2023 of $2.10 to $2.70 per share. This wide basically suggests that at this early date Kohl’s is fighting for a strong come-back but is trying to keep its options open. The next two quarters will be weak and earnings below last year as the company disposes of marked-down merchandise. It will be in the fall and winter when Kingsbury’s direction will take hold, when new merchandise will be available in all stores and a new era will begin.