The department store chain reported disappointing fourth-quarter sales but says it has no plans for a major overhaul of its store footprint as it works to revive growth.
Kohl’s posted fourth-quarter net sales of $5 billion, down nearly 4% year over year, while comparable sales declined close to 3%. CEO Michael Bender acknowledged the results were underwhelming, saying they “presented clear opportunities.”
Despite the sales drop, profitability improved. Gross margin rose 25 basis points to 33.1%, and net income jumped 160% to $125 million during the period.
Looking ahead, Kohl’s issued a cautious outlook for the year, forecasting that both net sales and comparable sales could decline by as much as 2%, or at best remain flat compared with 2025.
For the full year, the retailer’s challenges were also evident. Net sales fell 4% to $14.8 billion, while comparable sales dropped 3.1%. Gross margin increased 34 basis points to 37.5%, and net income climbed 150% to $272 million.
In response, Kohl’s is making adjustments across merchandising, pricing and marketing as it attempts to reverse ongoing declines.
However, executives say sweeping changes to the company’s physical store network are not part of the strategy. Nearly 30 locations were closed last year, and the retailer continues to evaluate performance annually, but most stores remain profitable.
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“Well over 90%” of locations are generating profits, Bender told analysts during a call Tuesday.
“I would not anticipate any sort of grand plan of … taking stores out or adding stores at this point,” he said. “The focus for us is actually on optimizing what we already have, and we’ll be focused on making sure that we continue to push the stores’ productivity as far as we can.”
Maintaining the current store base could prove important to the company’s turnaround, according to analysts.
Inside its stores, Kohl’s is working to streamline product selections and emphasize lower price points. The company has also introduced a new in-store feature known as the Deal Bar, which highlights discounted merchandise.
In apparel, the retailer is concentrating on categories such as basics, dresses and activewear while expanding its private-label offerings.
Its Jumping Beans baby line and the FLX Kids children’s activewear brand are expected to be available in all stores by the second quarter.
“The big thing that we want to make sure that we’re going after is value,” Chief Financial Officer Jill Timm told analysts. “We know we serve the middle- to lower-income customer. We know they have to be choiceful with their discretionary spend.”
“These things go to the heart of Kohl’s issues. It is a retailer that is simply not showing up in the right way for consumers who are increasingly discerning.”
The company’s modest guidance suggests declines could ease but may not disappear soon. Analysts say the company may ultimately need deeper changes than those currently outlined.
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