Store closings signal majo
Kohl’s Corp. has announced that it will shutter 18 stores this year as the retailer works to reduce costs and rework its strategy to find a balance between brick-and-mortar and online channels. The closures are part of a shift in strategy that will generate savings and allow for better omnichannel operations.
The announcement also comes on the heels of the elimination of three senior executive positions as part of the company-wide initiative designed to create a “faster, more agile organization.”
The announcement came as part of the Earnings Call, during which Kevin Mansell, Chairman, President , and CEO of Kohl’s stated “We believe that the strategic framework of the Greatness Agenda is working as evidence by our achievement of five consecutive quarters of positive comparable sales increases. I am particularly encouraged by the 4 percent increase we saw between Thanksgiving and Christmas. At the most competitive time in retail, customers were choosing Kohl’s.”
“This strength however, was substantially offset by softness in early November and in January when demand for cold-weather goods was especially low,” Mansell continued, “resulting in a quarterly comparable sales increase of 0.4 percent, which was below our expectations.”
As part of the Greatness Agenda and the reimagination of the Kohl’s experience, the retailer will pilot a new smaller format Kohl’s store, opening 7 of these stores across the country in 2016; add 2 additional Off-Aisle pilot stores in Wisconsin; and open 12 Fila outlet stores, marking Kohl’s first entry into the outlet space.
Unfortunately, Mansell conceded, the store closings are a necessary step to revitalize Kohl’s. “While the decision to close stores is a difficult one, we evaluated all of the elements that contribute to making a store successful, and we were thoughtful and strategic in our approach,” he explained. “We are committed to leveraging our resources on our more productive assets. Importantly, we also wanted to provide the best options for our associates and are proud that every affected store associate will be offered a position at a nearby Kohl’s location, or if they prefer, a competitive severance package.”
While 18 stores may not sound like much, it marks the first time in the retailer’s history that such a move has been necessary, Fortune reported. CFO Wes McDonald acknowledged that Kohl’s has only shuttered approximately 5 locations since 2003. The Kohl’s fleet now comprises 1,160 stores. A list of closings has not yet been released. The number of stores – representing only 1 percent of square footage for the retailer – is significant because it represents the shift in strategy toward smaller stores and outlets as Kohl’s refocuses its omnichannel efforts to boost sales and profitability by winning and retaining shoppers.
"As painful as it is to close stores, we applaud Kohl's for taking action that is necessary in order to compete more effectively in a more complex and challenging retail environment," Carter Harrison, an analyst at the Conlumino retail research firm, told investors according to CNBC. "It is especially encouraging that such a move is only one part of a wider package of measures, many of which involve more positive steps to reinvigorate the company."
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