Store closures resulting from the COVID-19 pandemic wreaked havoc on Kohl’s first-quarter financial performance.
Kohl’s reported net sales of $2.16 billion for the quarter ended May 2, a 44% drop from $3.82 billion in the year-ago period. The department store chain reported a net loss of $541 million, compared to a profit of $62 million the prior year quarter. The retailer missed analyst expectations for both net sales and net loss. (Kohl’s did not report same-store sales in light of its closure of all stores nationwide on March 19 due to COVID-19 concerns.)
In one positive development, Kohl’s digital sales rose 24% during the quarter. Top-performing online categories included home, activewear, toys, and beauty.
On the company's earnings call with analysts, executives said that Kohl's plans to eliminate eight "down-trending" women's brands — Dana Buchman, Elle, Jennifer Lopez, Mudd, Candie’s, PopSugar, Rock & Republicand Juicy Couture - as it focuses on growing the active category. (Kohl's previously announced it would discontinue eight brands but did not name them.)
“We’ve nearly doubled our active sales since 2013, and we see continued momentum in this category as customers focus on staying healthy," said CEO Michelle Gass on the call.
In addition, Kohl’s has begun a phased approach to reopening stores across the country and about 50% of its brick-and-mortar outlets are now open with modified operations.
On March 30, Kohl’s temporarily furloughed store and store distribution center associates, as well as some corporate office associates whose work has been significantly reduced by the store closures. Glass stopped taking a salary on that date for the duration the COVID-19 crisis.
Kohl’s said it has also taken the following steps to preserve financial liquidity and financial flexibility:
• Managed inventory receipts meaningfully lower,
• Significantly reduced expenses across the business inclusive of marketing, technology, operations and payroll,
• Decreased planned capital expenditures by approximately $500 million,
• Suspended share repurchase program,
• Suspended regular quarterly cash dividend beginning in the second quarter of 2020,
• Replaced and upsized revolver to $1.5 billion secured facility, and
• Issued $600 million notes due 2025.
“We entered the year in a strong financial position and our business was tracking to our expectations prior to the onset of the crisis,” said Gass. “We immediately responded with actions to protect the health and safety of our associates and customers and to preserve our financial position. I am incredibly proud of how our associates stepped up to face this unprecedented challenge with speed and agility. Our actions to manage cash outflow and increase liquidity have been instrumental in enhancing our position to navigate this crisis, and we believe our history of prudent capital management will continue to serve us well.”
Kohl’s operates more than 1,100 stores in 49 states.