In March 2025, Kohl’s Corporation released its financial results for the fourth quarter and full year of fiscal 2024, revealing significant challenges faced by the company. Despite efforts to revitalize its business, Kohl’s experienced a notable decline in sales and profits, prompting strategic decisions to address these issues and reposition the company for future success.
Fourth Quarter Financial Performance
For the 13-week period ending February 1, 2025, Kohl’s reported net sales of $5.2 billion, a 9.4% decrease compared to the same period in the previous year. This decline was partially attributed to the absence of the 14th week in the fiscal calendar, which contributed approximately $164 million in net sales in the prior year. Comparable sales, which measure sales in stores open for more than a year, fell by 6.7%, with store sales declining by 3.1% and online sales dropping by 13.4%. Despite these challenges, the company achieved a gross margin of 32.9%, marking a 49 basis point improvement year-over-year.
Operating income for the quarter was $126 million, a decrease from $299 million in the previous year, resulting in an operating margin of 2.3%. Net income stood at $48 million, or $0.43 per diluted share, while adjusted net income was $106 million, or $0.95 per adjusted diluted share. These figures reflect a substantial decline from the previous year’s net income of $186 million, or $1.67 per diluted share. Operating cash flow amounted to $596 million, and inventory levels increased by 2% year-over-year to $2.9 billion.
Full Year Financial Results
For the 52-week period ending February 1, 2025, Kohl’s reported net sales of $15.4 billion, a 7.2% decrease compared to the previous year. Comparable sales declined by 6.5%, with store sales down by 3.4% and online sales decreasing by 10.1%. Gross margin for the year improved to 37.2%, an increase of 50 basis points from the previous year. Selling, general, and administrative (SG&A) expenses decreased by 3.7% to $5.3 billion, but as a percentage of total revenue, SG&A expenses rose to 32.7%, up from 31.5% in the prior year.
Operating income for the year was $433 million, a decrease from $717 million in the previous year, resulting in an operating margin of 2.7%. Net income was $109 million, or $0.98 per diluted share, and adjusted net income was $167 million, or $1.50 per adjusted diluted share. These figures represent a significant decline from the previous year’s net income of $317 million, or $2.85 per diluted share. Operating cash flow for the year totaled $648 million, and the company reduced its long-term debt by $113 million through the redemption of remaining 9.50% notes due May 15, 2025.
Strategic Actions and Outlook
In response to the financial challenges, Kohl’s announced several strategic actions aimed at improving profitability and operational efficiency. The company revealed plans to close 27 underperforming stores across 15 states, representing less than 3% of its 1,150 locations. Additionally, Kohl’s will end its in-store Amazon return program in several locations and close its San Bernardino e-commerce fulfillment center when its lease expires in May 2025. These decisions are expected to result in the elimination of approximately 10% of the corporate workforce, with affected employees offered severance packages or opportunities to apply for other roles within the company.
Looking ahead, Kohl’s provided a cautious financial outlook for fiscal year 2025. The company expects net sales to decrease by 5% to 7%, with comparable sales declining by 4% to 6%. Operating margin is projected to be in the range of 2.2% to 2.6%, and diluted earnings per share are anticipated to range from $0.10 to $0.60. Capital expenditures are expected to be between $400 million and $425 million, and the company declared a quarterly cash dividend of $0.125 per share, payable on April 2, 2025.
Market Reaction and Analyst Perspectives
The market reacted negatively to the earnings report, with Kohl’s stock price falling by 26% to $8.91 on March 11, 2025, marking its lowest closing price since January 1997. Analysts expressed concerns about the company’s ability to execute its turnaround strategy amid a challenging retail environment. Despite surpassing earnings expectations, Kohl’s faces significant hurdles in reversing declining sales and improving profitability. The company’s efforts to enhance the in-store experience, value proposition, and product offerings will be critical in determining its future performance.
Kohl’s fiscal year 2024 results reflect the ongoing challenges faced by the company in a competitive retail landscape. While the company has taken steps to address these issues, including strategic store closures and workforce reductions, the effectiveness of these measures will depend on the successful execution of its turnaround strategy and the broader economic conditions impacting consumer spending.