Kohl’s Corp., seeking to pull itself out of the doldrums and take a fresh approach, is eliminating 250 positions and shaking up the ranks of senior management, WWD has learned.
Among those leaving Kohl’s are Michael Gilbert, executive vice president of product development, as well as Chris Kolbe, senior vice president design and trend. Some divisional merchandise managers are also leaving, sources said.
Doug Howe continues as Kohl’s chief merchandising officer.
While streamlining, the team of general merchandise managers will be expanded from four to seven so merchants are more specialized and can sharpen their focus on assigned categories. One source said a kids gmm will be added.
WWD has also learned that a new corporate strategy will be unveiled at next month’s investor conference under the theme “Growth Agenda.”
That would replace “The Greatness Agenda” strategy which Kohl’s built on five “pillars” or initiatives to provide what the company listed as “amazing product, incredible savings, easy experience, personalized connections and winning teams.”
Kohl’s streamlining and management reorganization comes in the aftermath of a weaker-than-expected holiday season. 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, according to Michelle Gass, Kohl’s chief executive officer.
Based on the holiday performance, the $20-billion Kohl’s expects its fiscal 2019 diluted earnings per share to be at the low end of its previously announced guidance range of $4.75 to $4.95.
According to Placer.ai, which tracks store traffic, Kohl’s was beset by traffic declines through 2019 compared to 2018, apart from a summer peak.
On Wednesday, when the streamlining was disclosed internally, Kohl’s stock rose 2 percent or 92 cents to $45.36.
“We restructured parts of our organization to create a more customer-centric focus and position Kohl’s for long-term success. This reorganization in our business will empower decision-making, reduce management layers, streamline communications and drive greater efficiency in many areas of our business. This includes the difficult but necessary decision to eliminate approximately 250 positions,” said Jen Johnson, Kohl’s senior vice president of communications.
Johnson said the departures include “removing a layer of regional store leadership roles and positions, restructuring teams in our merchant organization, and changes to other positions in our corporate offices. We put a great deal of thought and planning into this decision and have offered a competitive severance package and outplacement services to help all affected associates as they transition to their next step. We deeply thank these associates for their contributions and years of service at Kohl’s.”
While Kohl’s in the last few seasons has shown depressed results, Johnson emphasized that Kohl’s “is in a position of financial strength. We are not closing any stores or corporate offices and we are continuing to hire in key areas.”
“Kohl’s is continuing to invest in many areas of the business including our stores, technology and strategic growth initiatives,” Johnson added. “The organizational changes we’ve made are driven by the evolution of our strategic business priorities to create a more agile and empowered organization to support our long-term sustainable growth.”
“They are going to up the number of gmms,” said one apparel source. “They’ll be more planning- and allocation-oriented,” the source said.
The planning and allocation functions will continue to report to Howe.
“They are looking to streamline and reorganize the setup,” said an apparel source. “Every time you have a meeting with Kohl’s, they come in with a whole big entourage.”
The source added: “Kohl’s hasn’t invested in stores the way Target has. Target stores are bright, the products are beautiful. It’s a different experience at Kohl’s. Their stores are dated. The merchandise looks old. Consumers are looking for something better.”
Kohl’s, historically, has had its ups and downs, but most retail experts believe the retailer will be able to recover soon from the current malaise.
Still, there are concerns.
In a recent research report, Jefferies analyst Randal Konik downgraded Kohl’s to hold, noting that while the retailer has made some great omni initiatives, comp sales and margins were declining.
“We are downgrading KSS as key categories have been weak, the biz is losing share, and we see comps continuing to underwhelm and margins declining,” the report read. “We like management’s traffic-driving initiatives, partnering with Amazon and Planet Fitness but Kohl’s results continue to be muted, regardless of the multiple self-help initiatives in place. Active, men’s and digital have been strong, but we believe momentum at competitors such as Target is likely to continue to nip at Kohl’s heels.”
Questions about the company’s partnership with Amazon, and how much impact it’s had on the business, are being raised of late, though the partnership was widely applauded when it was first unveiled in 2017. In 2019, Kohl’s started accepting and processing Amazon returns at all of its stores, and in November, ceo Gass told analysts: “The program is driving incremental traffic into our stores, and we are particularly encouraged by the disproportionate amount of new customers, which on average are also younger than the typical Kohl’s customer.”
Originally, Kohl’s arrangement with Amazon was exclusive but a few other chains have since partnered up as well. At Rite Aid, for example, Amazon deliveries can be picked up.
In the third quarter, Kohl’s net earnings fell 24 percent to $123 million, or 78 cents a diluted share. Adjusted earnings per share were lower, at 74 cents a share, and well below the 86 cents analysts projected. Net sales for the three months ended Nov. 2 slipped 0.1 percent to $4.63 billion. However, Gass said that quarter’s comparable sales increase of 0.4 percent marked a return to growth after several down quarters, including the second-quarter comp decrease of 2.9 percent.
Other executives departing include Leslie Leonard, divisional merchandise manager of juniors and girls, and Leah Neuroth, vice president and divisional merchandise manager of misses and contemporary sportswear.
Gilbert spent 14 years at Kohl’s, the last five in his latest role. Earlier, he served as senior vice president, men’s, young men’s, kids and juniors product development and global strategic sourcing. Before Kohl’s, he was a divisional merchandise manager at Gap and American Eagle Outfitters.
Kolbe has worked at Kohl’s for five years. Earlier, he worked at Sonos as global leader of direct-to-consumer retail. Before that, he was at Lands’ End’s serving as brand president, and earlier working as executive vice president chief merchandising and design officer.