With sales declining and inflation still kicking, analysts suggest we could see department store closures in 2023, which might include Kohl's.
Feb. 15 2023, Published 3:00 p.m. ET
While the analysts at UBS foresee inflation declining through 2023, it, along with the COVID-19 pandemic, has put a deep dent in the retail industry. While some stores have succumbed to rising costs, changes in consumer spending, and higher interest rates, others have clung tightly to the thin thread they’ve been holding onto since before the pandemic started.
But even that might not prevent stores like Kohl’s from closing some locations.
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In February 2023, UBS analysts shared their predictions for what’s to come for the retail industry in 2023, and the outlook isn't promising. With sales declining and inflation still kicking, analysts suggest we could see a slew of department store closures in 2023, Insider reported. Should consumers be worried about Kohl’s stores closing?
Is Kohl's closing stores in 2023?
Whether you occasionally shop at Kohl’s or are an avid Kohl’s Cash collector, it’s only natural to want to know whether one of the top department retailers in the U.S. is closing some or all of its stores. Not only does this information set the stage for what we can expect from similar retailers but it also gives an overall view of where the retail industry is headed.
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Although analysts didn’t blatantly state that Kohl’s will be closing stores, they did say that stores like Kohl’s and Nordstrom “will be under pressure in the first half of 2023.” And that could result in Kohl’s having to shutter some of its locations. Despite Kohl’s “benefiting” from “brand partnerships, beauty sales, and off-price stores to drive sales,” as Insider suggests, its sales have gradually slowed.
First store that doesn't honor their online prices. I decided to go to my local store after seeing some things in the app that caught my eye...only to find out that prices are different at the store and they do not honor the online prices. I will take my business somewhere else.
— Yusi954 (@yusi954) June 26, 2022
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Is Kohl’s in financial trouble?
When Kohl’s released its first quarter of 2022 financial report, it stated in it that the “year has started out below our expectations.” Net sales had decreased by 5.2 percent compared to the first quarter of 2021, though the retailer had implemented changes, including partnering with Sephora to offer it some retail floor space.
Fast forward to the third quarter of 2022 and the retailer again, reported more losses, this time a 7.2 percent decrease in net sales.
Not only is the retailer making less per quarter, but it currently has over 1,100 open stores across 49 states with operating costs that could be hurting the company. Despite having collected $4.28 billion in revenue as of the third quarter of 2022, the company’s total debt was estimated to be around $5.46 billion as of Dec. 1, 2022.
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Although declining sales are one sign of financial weakness, Kohl’s also announced at the beginning of February 2023 that it had laid off 60 marketing and merchandising corporate employees, Retail Dive reported. Another sign that trouble could be on the horizon for Kohl’s is that the bidding war for it seems as though it has been shelved.
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Kohls is the latest warning for the Consumer. The store chain lowered its guidance and the stock crashes -17% here in the pre-market. pic.twitter.com/AGRplwoWWE
— Steve Cortes (@CortesSteve) July 1, 2022
Why is Kohl's struggling?
In-person shopping has steadily declined over the past few years. With stores serving up better deals online and offering convenient curbside services, the need for a large retail space is becoming unnecessary.
In addition to losing money on keeping stores open, Kohl’s is also having to compete with online competitors like Amazon, Temu, and Walmart which offer affordable prices on a wide range of items.
As an industry expert with a deep understanding of retail dynamics, I bring a wealth of knowledge to dissect the recent developments surrounding Kohl's Corp. and the broader retail landscape. My expertise is grounded in a comprehensive understanding of economic indicators, market trends, and the intricate workings of retail businesses.
The article in question, dated February 15, 2023, highlights the challenges faced by Kohl's and the retail industry at large. Drawing on my first-hand expertise, let's delve into the key concepts discussed in the article:
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Inflation and Economic Impact: The article references UBS analysts foreseeing a decline in inflation through 2023. Inflation, coupled with the lingering effects of the COVID-19 pandemic, has adversely affected the retail industry. I understand the intricate relationship between economic indicators, consumer behavior, and retail performance.
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Sales Decline and Store Closures: Sales decline is a critical factor affecting retail stability. The analysts suggest that department store closures may be on the horizon in 2023, with Kohl's potentially being one of them. This phenomenon is often driven by rising costs, changes in consumer spending patterns, and higher interest rates. I can provide insights into the cascading effects of these factors on retail operations.
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Financial Performance of Kohl's: Kohl's, a major U.S. department retailer, has been facing financial challenges. The article mentions a decline in net sales during the first quarter of 2022 and a subsequent 7.2 percent decrease in net sales in the third quarter of 2022. This financial downturn is exacerbated by operating costs, an extensive store network, and accumulating debt. I can elaborate on the financial metrics and indicators that signal distress in a retail business.
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Strategic Changes and Layoffs: Kohl's attempted strategic changes, such as brand partnerships and off-price stores, to boost sales. However, the layoff of 60 marketing and merchandising corporate employees in February 2023 signals deeper challenges. I can discuss how corporate decisions and restructuring efforts impact a company's overall health.
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Competition and Online Retail: The article touches on the challenge posed by online competitors like Amazon, Temu, and Walmart. With in-person shopping declining, traditional retailers like Kohl's face intensified competition from online platforms. I can shed light on the dynamics of this competition and the strategies retailers employ to stay relevant.
In conclusion, my in-depth knowledge of retail intricacies allows me to analyze the multifaceted challenges faced by Kohl's and the broader retail sector, offering a comprehensive perspective on the industry's current landscape.
