Kohl's Stock Plunges After Disappointing Earnings and CEO Exit: Can the Company Still Compete?

Kohl's has added to its recent streak of disappointing news with the release of its Q3 earnings on Nov. 26.

As The New York Post reported, a same-store sales decline of 9.3% was only one of the figures contributing to a poor earnings report — the department store's 11th quarterly earnings report in a row illustrating a decline.

At the same time, the company announced that CEO Tom Kingsbury would be stepping down from his role. However, Kingsbury will remain in an advisory role and retain his seat on the company's board until his retirement in May 2025. Michaels CEO Ashley Buchanan will replace Kingsbury as CEO on Jan. 15, 2025.

Kohl's Q3 Earnings: The Latest Sign of Unease for Some Traditional Retailers?

The latest earnings report put forth by Kohl's offered little hope to investors. In a post-earnings call discussion, Kingsbury was straightforward in his observation of the company's performance.

"Our results did not meet expectations, and we're frankly disappointed sales have been a challenge for us throughout 2024 and weakened further in the quarter," he said, per FOX Business.

As Investopedia outlined, Kohl's saw Q3 net revenue tumble year-over-year by 9% to $3.51 billion, with profit of $22 million (or 20 cents per share). This was well below analyst estimates of $3.85 billion in revenue and $29.8 million in profit (or 27 cents per share).

Furthermore, Kohl's took a pessimistic turn regarding its full-year net sales outlook, revising its estimates downward from a previous decline of 4% to 6% to a bleaker 7% to 8%. It also revised its earnings per share (EPS) expectations downward from a previous estimate of between $1.75 and $2.25 to between $1.20 and $1.50.

The ill tidings for Kohl's come directly on the heels of a troubled Macy's earnings report as well — one which has been delayed until Dec. 11 after it was revealed that an employee had hidden up to $154 million in delivery expenses.

Macy's did issue a preliminary earnings report, however, and it was downbeat as well, according to CNBC. Sales turned downward by 2.4% to rest at $4.7 billion, while comparable sales for its owned and licensed business, as well as for its online marketplace, fell by 1.3%.

Can Kohl's Truly Recover After Such a Long and Significant Decline?

The primary question facing retail industry analysts as well as investors is: Can Kohl's actually turn around a so-far steep decline?

On Tuesday after the earnings report and CEO announcement, investor skepticism seemed quite high, with Kohl's stock falling by 17% by market close. Furthermore, the stock has plummeted by around 47% year-to-date.

Facing similarly problematic financials coming from company reports earlier this year, Kingsbury indicated that Kohl's had attempted a significant repositioning in the market to confront contemporary challenges to its business, without much success.

"[Our] efforts have yet to fully yield the intended outcome due in part to a continued challenging consumer environment and softness in our core business," the departing CEO said in August, as reported by FOX Business.

In terms of a turnaround, Kingsbury gestured toward a few key areas of potential improvement during the Nov. 26 earnings call:

• A push on digital and social media marketing in terms of new customer capture.
• Capitalization on the 4 million new Kohl's Rewards members, hoping to drive loyalty rewards-based holiday spend.
• A rebalancing of buys to ensure inventory for key private brands.
• A reintroduction of the fine jewelry category, the loss of which was apparently felt by longstanding customers.
• Launching Hotelier, a Kohl's bedding and bath brand.
• A continued and enhanced partnership with Sephora, an opportunity that is spurring growth.
• A similar partnership enhancement with Babies"R"Us.

Whether the incoming CEO can change the company's course for the better is the elephant in the room, particularly given how far Kohl's will have to climb to reach its previous market share (and stock price). Competition is fiercer than ever, with larger retail players such as Amazon and Walmart delivering strong quarterly results while rapidly expanding their markets — both demographically and in terms of new and technologically sleeker marketplace options.