Kohl’s has a mess of inventory on its hands

Kohl can’t get a break, and maybe he has only himself to blame. People walk near a Kohl’s department store in Doral, Florida on June 7. (Joe Raedle, Getty Images)

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NEW YORK — Kohl’s can’t seem to catch a break, and he may have only himself to blame.

The department store chain presented a gloomy outlook for 2022 on Thursday, saying it expects sales to fall 5% to 6% from a year ago and blames high inflation to prevent shoppers – especially its middle-income consumers – from spending more in its stores. The company also reported lower sales and profits for the quarter ended July 30.

Kohl’s shares fell more than 7% on Thursday.

But the economy is not his only problem. Kohl’s, similar to other big chains including Target and Walmart, is stuck with a lot of excess inventory that it cannot be erased. The chain’s inventory in the quarter was 48% higher than the same period last year.

“We have adjusted our plans, implementing actions to reduce inventory and reduce expenses to account for the weaker demand outlook,” Kohl CEO Michelle Gass said in a statement.

Unstable course

With more than 1,100 stores in the United States and approximately $19 billion in annual sales, Kohl’s is the largest department store chain in the United States. But the company is struggling to find its own way.

Kohl’s pitched and then withdrew the idea of ​​selling itself to Franchise Group, a holding company that owns The Vitamin Shoppe and other retail brands, which the company said was due to funding issues and a difficult economic environment.

The retailer is trying various tactics to stay relevant, especially for younger consumers. It recently partnered with popular cosmetics brand Sephora to open Sephora mini-stores on its premises. Kohl’s said the move has helped it acquire a million new customers since last August, who are younger, more diverse and shop more frequently than the average consumer.

And last week, the retailer announced it was rolling out a self-service pick-up option to all of its stores for online orders within two hours.

But all of these efforts, while necessary for Kohl’s, can’t completely cover up the chain’s most fundamental problem, said Neil Saunders, retail analyst and managing director of GlobalData Retail.

“In our view, the main source of Kohl’s woes is internal. Specifically, the company has lost track in terms of merchandising and lineup planning and appears to be taking a seemingly random approach to buying. The result is a jumble of disjointed products in stores, which is exacerbated by a very serious deterioration in store dress standards,” Saunders said in a note Thursday.

“Previously, although a bit uninspiring, Kohl’s was disciplined and neat in its presentation. Over the past year, that’s all gone,” Saunders said. “In this type of economic environment, consumers will quickly abandon purchases and stores that require too much effort for too little reward.”

Katherine Miklosik, who lives in the Toronto area, said she’s been shopping at the department store chain for decades and is such a dedicated Kohl fan that whenever she travels to the United States , she carries her Kohl’s card and discount coupons with her.

“I typically spend several hundred dollars in-store on each trip,” she said. “As a cross-border shopper, I like buying clothes in the United States that are different from the stores here. The sales (from Kohl’s) are amazing and until recently there was such a wide variety of options for clothing, handbags, housewares and seasonal decor.”

But his last trip, on August 13, to a Kohl’s in Watertown, NY, was a disappointment. Miklosik said she left the store “in a near panic attack from the mess and chaos.”

“On this visit, I spent $12.10 on a reusable shopping bag with the Kohl’s logo and two stuffed animals with proceeds going to the Kohl’s Cares Foundation,” she said. “I even told the cashier that I was so overwhelmed that I had to leave, and maybe I’d try again the next day. I didn’t.”

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