Months of financial pressure brought on by the Covid-19 pandemic culminated in massive layoffs at Kohl’s Tuesday.
The Wisconsin-based mid-market department store retailer and employer of roughly 122,000 is cutting 15 percent of corporate jobs, according to a federal document filed Tuesday. The move will save about $65 million annually, and Kohl’s expects to record $23 million in pre-tax costs during the third quarter. The job cuts, on top of other restructuring initiatives, are expected to reap $100 million in annual savings, it added.
Following the Kohl’s second-quarter earnings report last month, which saw sales decline 23 percent year-over-year, the company lamented a weaker start to its back-to-school selling season, while CEO Michelle Gass said holiday sales could begin as early as October. The company also warned about a possible slowdown in sales in the back half.
Oliver Chen, luxury and retail analyst at Cowen & Co., believes the retail chain is heading in the right direction, despite the downsizing.
“We do believe Kohl’s has promising long-term efforts in place to embrace and execute on casualization, active product and the attractive beauty category,” he said. “We also believe [stock keeping unit] rationalization or ‘doing more with less’ is a prudent strategy as long as the company chooses the right items to eliminate.”
Jefferies retail analyst Randal J. Konik said Kohl’s home, active apparel and children’s quarterly sales trends were better than expected, noting the company has significantly reduced inventory. But the outlook for the back half was “hazy,” he added, pointing out that the company is “on the defense as competitors such as Target have been taking share and will likely continue to do so.”
The decision to slash headcount comes as Hurricane Sally has forced six Kohl’s stores to temporarily close in Alabama, Florida, Louisiana and Mississippi, a notable blow after the coronavirus crisis has already battered brick-and-mortar retail this year.
Kohl’s was busy last month refreshing its digital footprint as many shoppers have maintained their appetite for online shopping, even as stores reopened after lengthy pandemic-induced pauses. Foot traffic to Kohl’s locations has trended better than rivals like Nordstrom and Macy’s, though volume remains down overall. The retailer updated its e-commerce site at the end of August in a redesign that it hopes will “encourage discovery” while highlighting its portfolio of national and private-label brands.
Earlier that month, Kohl’s updated the Augmented Reality Virtual Closet it launched in the spring with the help of Gen Z-loved social app Snapchat. This time around, the chain swapped out athleisure and work-from-home wares for a fresh back-to-school curation. Consumers engaging with the Snapchat experience can tap into the Selfie Lens feature to virtually try on a Levi’s Trucker Jacket, Kohl’s said.
Additional reporting by Jessica Binns.