Kohl's 'is a business whose time has passed,' analyst says

Brian Sozzi
Updated

Kohl's (KSS) is bordering on irrelevancy, and it may stay that way for years to come, warned one veteran retail analyst.

"Kohl's is a business whose time has passed," Jan Rogers Kniffen, CEO of J Rogers Kniffen Worldwide, said on Yahoo Finance Live (video above). "They were the rising star all through the '80s, '90s, and into 2000, and at that point in time they wound up with 1,150 stores in a space that probably only needed 750. and they have been mature and struggling ever since."

Those struggles were on full display in Kohl's third-quarter earnings results out on Thursday.

ROCKFORD, ILLINOIS - MARCH 24: The parking lot is nearly deserted in front of the Kohl's store at Forest Plaza on March 24, 2020 in Rockford, Illinois. Forest Plaza is a shopping mall with more than 30 stores, most of which have been closed as residents of the state deal with a shelter-in-place order in an attempt to curtail the spread of COVID-19. (Photo by Scott Olson/Getty Images)
The parking lot is nearly deserted in front of the Kohl's store at Forest Plaza on March 24, 2020, in Rockford, Illinois. (Photo by Scott Olson/Getty Images) (Scott Olson via Getty Images)

Comparable same-store sales tanked 6.9% for the quarter as consumers pulled back on discretionary merchandise such as apparel while adjusted operating profits crashed 50% from a year ago.

The company's inventory also ballooned $1.2 billion from last year as sales slowed and merchandise assortments missed the mark, causing Kohl's to move aggressively to liquidate unsold products. In turn, Kohl's gross profit margin plunged 260 basis points year-over-year.

Kohl's proceeded to pull its full-year guidance, owing to operational problems and economic uncertainty ahead of the peak holiday shopping season.

Kohl's stock was up more than 2% as of midday trading Thursday.

The retailer is currently in search of a new CEO following the departure of embattled leader Michelle Gass.

Gass, who is leaving to join Levi's, came under fire for poor operational performance by several activist investors. Moreover, Gass and the board of directors badly botched a sale process earlier this year that led to billions in lost shareholder value.

Kohl's is "not getting any help right now," Kniffen said. "We saw what happened to [JC Penney], and Kohl's and Penney's were in the same space. There was plenty of market share to take there, and Kohl's didn't take it because they just haven't executed the business well."

"I think the other part of the problem is they are just not a growth business anymore," Kniffen added, "and they're not going to be."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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