Kohl’s Woes Just Got A Whole Lot Worse
Kohl's woes are predicted to get a whole lot worse, following the release of a recent fiscal analysis by Bank of America.
Kohl’s has had a tough time, lately. And that is putting it lightly. The enormous department store chain has been fighting to stay relevant and lucrative amid a rapidly changing retail landscape. A long period of declining sales bookended by failed business strategies led the department store retailer to put up a for sale sign. However, after a period of intense negotiation, Kohl’s decided to take its business off the market and take matters back into its own hands, at least for now. While that may have been the best move it could have made, Kohl’s woes are far from over. In fact, it looks as though they are going to get worse before they even have a chance of getting better.
Bank of America analyst Lorraine Hutchinson has moved to downgrade Kohl’s at the stock market. Hutchinson has officially labeled the retail behemoth as underperforming. Essentially, this means that Bank Of America has little faith that Kohl’s will do well earnings-wise in the coming quarter. Early projections estimate Kohl’s profits to dip by an additional 16%. Considering the retailer’s size and market breadth, 16% is significant.
The projected poor outlook for Kohl’s stems from a list of compounding factors. First inflation’s unceasing chokehold combined with recession fears has caused shoppers to alter their spending patterns. Consumers have pivoted their priorities and spending power towards essential purchases. This shift is occurring so that consumers can attempt to save any money they can during a time when absolutely everything costs more, as well as to protect whatever extra savings they have should a recessionary period definitively take hold. Second, these shifts have left stores, like Kohl’s, with a lot of extra inventory to deal with. For Kohl’s, not being able to move inventory will equate to sizable losses.
Lastly, Kohl’s does not have the business model nor the presence to compete with the likes of other big-box retailers like Target and Walmart. For starters, Kohl’s online presence does not come close to either Target or Walmart. Second, Kohl’s can not leverage the essential departments (like food) that Target and Walmart can. Thus, as the months trudge on Kohl’s is likely to come face to face with its biggest business challenges yet.
Kohl’s predicament, however, is not unique to it. Hutchinson explained that another factor that affected her decision to downgrade the retailer to underperform is analysts’ overall outlook regarding the health of department stores. “We are downgrading Kohl’s back to Underperform to realign it with our negative view on the department store industry…,” explained Hutchinson. Various other stores are predicted to have a difficult year ahead that could make or break them. Nordstrom and Macy’s were among those expected to underperform.
Ultimately, the coming months will serve to test and challenge Kohl’s in significant ways. However, there is a greater undercurrent that can be extrapolated from the analysts’ latest predictions, and it’s that the retail landscape is slowly inching toward a complete transformation. People are just not shopping in the same ways or via the same outlets they once were. Unless it can find a way to recoup some industry relevancy, Kohl’s will likely become a casualty of this emerging retail industry remodeling.
