Kohl's is closing stores as the department store industry collapses

U.S. Retail Earnings Roundup
U.S. Retail Earnings Roundup

Kohl's is closing 18 stores following a disappointing fourth quarter.

The department store chain reported a 20% drop in fourth quarter profit on Thursday, and said it expects relatively flat sales for the year.

The stores represent less than 1% of total sales, and closing them is expected to cut costs by roughly $45 million, the company said.

The retailer said it would provide a list of which stores are closing in late March.

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"While the decision to close stores is a difficult one, we evaluated all of the elements that contribute to making a store successful, and we were thoughtful and strategic in our approach. We are committed to leveraging our resources on our more productive assets," Kohl's CEO Kevin Mansell said in a release.

Department store competitors Macy's, Sears, and JCPenney have been closing stores.

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Analysts at RBC Capital Markets believe that this is part of a larger trend in retail, as more customers shop online instead of in stores.

"Macy's announced store closings could have a number of implications on the overall retail landscape," the analysts write. "We believe Macy's decision will catalyze other specialty retailers and department stores to take a harder look at their boxes in these underperforming centers."

Kohl's is also adding several new types of stores, including seven smaller-format Kohl's stores in various regions around the country and two "Off-Aisle" pilot stores in Wisconsin this year.

The Off-Aisle stores are stocked entirely with returned merchandise that has been deeply discounted.

The retailer is also planning to get into the outlet business by opening 12 outlet stores featuring Kohl's Fila sportswear brand.

Overall, Kohl's profit fell to $296 million, or $1.58 a share, down from $369 million, or $1.83 a share, a year earlier. Sales increased 0.8% to $6.39 billion.

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