Kohl’s Corporation looks to kick off on a significant and ambitious turnaround effort under new CEO Ashley Buchanan, focusing on rebuilding its proprietary brands, simplifying promotions and enhancing the omni-channel customer experience, according to commentary on the company’s fourth-quarter conference call with analysts.

Buchanan, the newly-minted CEO who joined the retailer in mid-January 2025, said he believes Kohl’s has a substantial opportunity to build on its solid foundation and position the company for future success.

“I have been in the retail industry for nearly 20 years now; I’ve held leadership positions at Sam’s Club and Walmart and, most recently, served as the CEO of the Michaels Companies for the past five years,” the new CEO commented. “I love the fast pace of the retail industry and the challenge of meeting changing customer expectations during the ongoing retail evolution.”

Buchanan said his review of the Kohl’s business is ongoing. “But, today, I want to share my initial takeaways and discuss a few opportunities we have identified to reposition ourselves for improvement in 2025 and to lay the groundwork for future progress and initiatives.”

“When examining recent performance, we have fallen short of fully delivering what our customers want and expect from Kohl’s,” he noted. “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 on a higher standard.”

Buchanan emphasized a strategic pivot toward improving the customer experience through a curated and balanced assortment, reestablishing value and quality leadership, and enhancing the omni-channel shopping experience.

“As we’re working through our merchandise strategies, our goal is to be driving improved assortment clarity across all categories with a purpose behind each brand and each product,“ he shared.

The CEO highlighted the importance of proprietary brands, including Sonoma and Flex, which he said resonate strongly with core customers. Asked about the balance between private label and national brands by an analyst, Buchanan emphasized that the customer will ultimately determine the mix, with a focus on delivering quality and value.

He also noted the need to simplify promotional strategies and optimize the store layout to enhance shopping convenience.

“We can improve the customer experience for more consistent in-stocks for high-volume items, particularly our basic and Essentials,“ the CEO continued. “We will continue to manage inventories highly but need to restore trip assurance for our customers through greater buy depth and supply chain agility.”

Buchanan said the company will optimize store layout through a combination of productivity and adjacency analysis. “This will provide clarity to the customer or the purpose of each brand,“ he noted. “We will thoughtfully improve category placement to create an easier shopping experience for customers to find their frequently purchased items and discover new and relevant choices. Achieving omnichannel platform requires both the store and digital business to work together in tandem.“

Buchanan noted that the goal of all this work is to make shopping at Kohl’s a more enjoyable and reliable experience. And the turnaround will take time.

“As you will see from the financial guidance we’re giving today, I want to set the expectations that this turnaround, while very achievable, will take some time,“ Buchanan cautioned. “Progress starts with the actions we are taking in 2025 to address opportunities and better serve our customers. This marks the initial phase of actions from our ongoing assessment.”

Fourth Quarter 2024 Results
Comparisons refer to the 13-week period ended February 1, 2025, versus the 14-week period ended February 3, 2024, unless noted otherwise:

  • Net sales decreased 9.4 percent year-over-year to $5.2 billion. The fourth quarter fiscal 2023 included net sales of approximately $164 million from the 14th week.
  • Comparable sales, which compare the 13-week period ending February 1, 2025 versus the 13-week period ended January 27, 2024, decreased 6.7 percent.
  • Gross margin, as a percentage of net sales, was 32.9 percent, an increase of 49 basis points.
  • Selling, general & administrative (SG&A) expenses decreased 4.5 percent year-over-year to $1.5 billion. As a percentage of total revenue, SG&A expenses were 28.5 percent, an increase of 148 basis points year-over-year.
  • Operating income was $126 million compared to $299 million in the prior year. As a percentage of total revenue, operating income was 2.3 percent, a decrease of 270 basis points year-over-year.
  • Net income was $48 million, or 43 cents per diluted share, and adjusted net income of $106 million, or 95 cents per adjusted diluted share. This compares to net income of $186 million, or $1.67 per diluted share in the prior-year Q4 period.
  • Inventory was $2.9 billion at year-end, an increase of 2 percent year-over-year.
  • Operating cash flow was $596 million.

Fiscal Year 2024 Results
Full-year comparisons refer to the 52-week period ended February 1, 2025, versus the 53-week period ended February 3, 2024, unless noted otherwise:

  • Net sales decreased 7.2 percent year-over-year to $15.4 billion. Fiscal 2023 included net sales of approximately $164 million from the 53rd week.
  • Comparable sales, which compare the 52-week period ending February 1, 2025 versus the 52-week period ended January 27, 2024, decreased 6.5 percent.
  • Gross margin as a percentage of net sales was 37.2 percent, an increase of 50 basis points year-over-year.
  • SG&A expenses decreased 3.7 percent year-over-year to $5.3 billion. As a percentage of total revenue, SG&A expenses were 32.7 percent, an increase of 118 basis points year-over-year.
  • Operating income was $433 million compared to $717 million in the prior year. As a percentage of total revenue, operating income was 2.7 percent, a decrease of 143 basis points year-over-year.
  • Net income was $109 million, or $0.98 per diluted share, and adjusted net income of $167 million, or $1.50 per adjusted diluted share. This compares to net income of $317 million, or $2.85 per diluted share in the prior year.
  • Full-year operating cash flow was $648 million.
  • Long-term debt was reduced by $113 million through the redemption of the remaining 9.50 percent notes due May 15, 2025.

2025 Financial and Capital Allocation Outlook
For the full year 2025, the company currently expects the following:

  • Net sales will decrease by 5 percent to 7 percent versus 2024;
  • Comparable sales are expected to decline by 4 percent to 6 percent for the year;
  • Gross margin is expected to improve by 30 basis points to 50 basis points year-over-year, supported by inventory management and increased proprietary brand sales;
  • Operating margins are projected between 2.2 percent and 2.6 percent and
  • Diluted EPS guidance is set at 10 cents to 60 cents per diluted share.

Capital Expenditures range from $400 million to $425 million for the year.

CFO Jill Timm said the company anticipates the first quarter of 2025 to be at the lower end of the annual guidance range due to macroeconomic uncertainties.

“While fiscal 2025 guidance reflects caution, the company is taking deliberate steps to address past challenges and reengage its core customer base,“ said Buchanan.

Dividend
On March 11, 2025, Kohl’s Board of Directors declared a quarterly cash dividend on the company’s common stock of $0.125 per share. The dividend is payable April 2, 2025, to shareholders of record at the close of business on March 21, 2025.

Image courtesy Kohl’s Corporation/Kohl’s Wichita Falls, TX