Many retailers have become very selective when it comes to what stores the chain keeps open. It seems like even successful chains occasionally shut down a location when a lease expires or even before if business gets bad enough.
Sometimes, that’s just a question of shifting populations. People may have moved, or their work may no longer require them to be in the office every day.
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That can mean that fewer people drive by a specific location of a store, making it less necessary or even not necessary. Those types of closures, however, are simply part of doing business.
When you get big enough as a chain, even when you are doing well overall, there will be outliers that don’t perform and need to be closed. Those are more a culling of the weak, than an overall sign of the health of the company.
Struggling companies, however, have to make more difficult decisions. Chains like Macy’s have not only closed money-losing stores, but breakeven locations. That’s an effort to conserve money and focus on the greatest areas of opportunities.
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Another national chain department store that has faced its own set of difficulties has been framing its store closures as a positive move. In theory, that could be the case, as sometimes you simply have to amputate rotten limbs in order for the entire tree to survive.
Kohl’s has struggled to remain relevant.
Image source: Shutterstock
Kohl’s closed 27 locations on April 5
It’s easier for a chain to shut down select locations while the broader company remains open than it is to liquidate an entire company. That’s because, well, there might be going-out-of-business sales. The parent company. That’s because, while there might be going-out-of-business sales, the parent company, and the transfer of certain inventory to locations that will not be closing.
Kohl’s shared in January that it planned to shut down 27 retail stores and one fulfillment center. At the time, the company was careful to frame the move as a positive, noting in the press release that it operated more than 1,150 locations.
“While Kohl’s continues to believe in the health and strength of its profitable store base, these specific locations were underperforming stores,” it shared.
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Chief Financial Officer Jill Timm downplayed the closures during Kohl’s fourth-quarter earnings call.
“I look at these 27 stores as hygiene, and that’s something we should be doing all the time. We look at it annually. We look at the stores that are underperforming, and we’re closing those regardless. There’s no limitations on which we could close and what makes the most sense,” she shared.
Kohl’s may close more stores
Timm also made it clear that more stores may be closed going forward.
“I think as we come up in the next several years, we have a lot of leases coming due which then affords you an opportunity to relook at, should we be relocating that store, downsizing that store, closing that store,” she added.
Kohl’s has also been testing a new, smaller store format that may make sense in some markets.
“We have a very productive prototype, particularly our main 80,000-plus prototype that’s very productive and very profitable’ said CEO Ashley Buchanan.
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She also thinks that the chain had some improvements to make at existing locations.
“If you look at inside the box, right, how we allocate space among categories and products and adjacencies, I think we’ve lost a little bit of discipline on that part, and there’s a lot of opportunity. I mean, just a simple thing we’ve done just recently before I got here is realigning casual pants next to the dress pants, and you saw an increase, right? It’s just the traditional way the customer shops and the adjacency piece,” she said.
