Kohl’s saw a disappointing year in 2019 with steep declines in profits and sales, but believes this year will begin to see things turn around.
The department store chain released quarterly earnings Tuesday before the bell, and while the results weren’t great, they were better than analyst expectations and shares jumped more than 5 percent in pre-market trading.
For the three months ending Feb. 1, revenues were $6.83 billion, up slightly from $6.82 billion the same time last year. Income for the fourth quarter was $308 million, down from $366 million a year earlier, but still better than forecast.
Meanwhile, sales for the full 2019 year were $19.9 billion, down from $20.2 billion in 2018. The annual income was $769 million, down sharply from $927 million a year earlier.
“While 2019 was a year in which our financial results did not meet our expectations, it was also a year of innovation and investment that further strengthened Kohl’s differentiation in the market,” Michelle Gass, Kohl’s chief executive officer, said in a statement. “We are encouraged by the acceleration of traffic and new customer acquisition in our stores and online driven by the unprecedented level of new brands and partnerships we launched during the year. I want to thank all of our associates for their ongoing commitment to Kohl’s and I am confident that we will build on our strengths in 2020 to stabilize and position the business for future growth.”
Categories like active, beauty, intimates and men’s wear remained strong growth drivers for the company. But headwinds persisted in the women’s apparel business, particularly in classics and contemporary styles.
“Kohl’s positioning and relevance in the market continues to be very strong,” Gass said Tuesday morning on the conference call with analysts. “It also demonstrates the strength of our team’s ability to constantly evolve the model to adapt today’s consumer; however, it’s clear we need to act with a greater sense of urgency.
“We recognize that we need a much more significant reinvention in women’s to improve the trajectory moving forward,” Gass added. “After a critical assessment across our entire brand offering, we’ve made the decision to exit eight women’s brands over the coming year,” she said, but was tight-lipped about which brands.
Kohl’s store traffic has been steadily declining for some time as consumers continue to shop online and in off-price stores like T.J. Maxx and Marshalls. Kohl’s stock, which quickly turned in the red during Tuesday’s trading session, is down more than 43 percent year-over-year. Last month, Kohl’s announced it was eliminating 250 jobs and shaking up the senior level leadership team.
The recent holiday shopping season didn’t offer much help.
Comparable sales for November and December 2019 combined decreased 0.2 percent over the same period last year. There was momentum in digital, active, beauty, children’s, footwear and men’s, but those results were offset by softness in women’s apparel.
But the retailer has a few tricks up its sleeves. These include its partnership with Amazon, which allows shoppers to return products they purchased on Amazon to Kohl’s stores.
In fact, the Amazon tie-up drove positive comps in January.
“It’s clear, and we know this from our metrics, that Amazon is bringing in a newer and younger customer, and bringing it into the stores,” Gass said. “Stores are critically important for us and so we’ve been really encouraged to see that level of engagement.”
Gass added that Kohl’s retail fleet — currently more than 1,100 in 49 states — along with the company’s customer base of 65 million shoppers, are some of Kohl’s biggest strengths.
“Beyond Amazon, we are exploring new opportunities that take advantage of our strategic assets,” she said.
Those include adding more experiences — like Outfit bars in stores and plans to open additional Planet Fitness locations near Kohl’s stores — and growing the activewear category.
“It’s not just about the sales of those brands, but it’s the halo that really does contribute to the overall relevancy of brand Kohl’s,” the ceo added.
“Until we have greater visibility, we remain cautious on the sidelines waiting for an inflection to more favorable business trends,” Jen Redding, an analyst at Wedbush wrote in a note. “A potential slowdown in business in February follows the [Kohl’s] holiday sales release as reported on January 9, at which time management announced lackluster [quarter to date same-store sales] and guided [fiscal year earnings per share] to the low end of the prior range.”
Kohl’s plans to hold an investor day in New York City on March 16.