MENOMONEE FALLS, WI - Kohl's Corp (NYSE:KSS), currently trading near its 52-week low at $13.69 and considered undervalued according to InvestingPro analysis, announced on Thursday a strategic move to shutter 27 underperforming retail locations and its San Bernardino e-commerce fulfillment center by April and May 2025 respectively.
This decision is a component of the company's broader efficiency initiatives aimed at bolstering the business's long-term health, as the retailer grapples with a 4.33% revenue decline over the last twelve months.
The closures represent about 2.3% of Kohl's over 1,150 stores nationwide. Despite the closures, Kohl's maintains confidence in the robustness of its remaining store portfolio, supported by a healthy gross profit margin of 40.12% and significant dividend payments to shareholders, currently yielding 14.83%. The San Bernardino center is one of 15 such facilities in Kohl's supply chain network across the country. The company has improved efficiencies and expanded its capacity to fulfill online orders from its stores, reducing reliance on the San Bernardino location.
Employees affected by the store closures have been notified and will be offered severance packages or the chance to apply for other positions within the company. Kohl's estimates it will incur pre-tax charges ranging from $60 million to $80 million related to these actions, with about $30 million in non-cash charges and an additional $30 million to $50 million in cash expenditures for severance and related costs. The majority of these charges are expected to be recorded in the fourth quarter of 2024.
While these charges were not anticipated in the company's financial outlook for 2024, released on November 26, 2024, Kohl's reaffirms its financial and capital allocation outlook for the full year 2024, excluding these charges. The company's management believes that providing financial measures excluding these charges offers a clearer perspective on the company's operational results.
The actual costs may vary from the estimates due to negotiations with landlords and the final number of associates affected. Kohl's also acknowledges the possibility of additional charges or expenditures not currently anticipated as a result of these activities.
In other recent news, Kohl's Corporation (NYSE:KSS) has faced a series of challenges that have led to significant changes in their financial outlook. Analyst firms TD Cowen, Telsey Advisory Group, Guggenheim, Citi, and Baird have all revised their price targets for the company, with TD Cowen reducing the target from $20.00 to $16.00, Telsey Advisory Group lowering it to $17 from $23, Guggenheim cutting it to $25 from $26, Citi reducing it from $18 to $14, and Baird downgrading the stock from Outperform to Neutral, reducing the target from $25.00 to $18.00.
The revisions follow Kohl's third-quarter earnings report, which revealed a significant drop in earnings per share to $0.20 and a steep 9.3% decline in same-store sales. Despite these setbacks, the company managed to increase its gross margin and saw a 15% rise in beauty sales through its partnership with Sephora.
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