s·CEO DailyInvestors Kohl’s turnaround plan despite risk that cuts will hurt sales in the long runBy Phil WahbaBy Phil WahbaSenior WriterPhil WahbaSenior WriterPhil Wahba is a senior writer at Fortune primarily focused on leadership coverage, with a prior focus on retail.SEE FULL BIO Kohl's is in the middle of a difficult turnaround.Getty Images—Michael Siluk/UCG/Universal Images GroupIn today’s CEO Daily: Phil Wahba on the turnaround at Kohl’s.
The big story: Nvidia beats earnings expectations, but stock falls. The : Mixed. Plus: All the news and watercooler chat from Fortune. Good morning.
I’ve covered retail for more than 15 years now, so if there’s one thing I’m familiar with, it’s a once-beloved retailer trying for the umpteenth time to mount a turnaround.
It can be done—see Walmart in the last decade and Target in the second half of the 2010s. But as I’ve been seeing at Kohl’s (No. 261 on the Fortune 500)—it’s extremely difficult.
Investors were practically giddy yesterday when Kohl’s surfaced some glimmers of good news in its second-quarter earnings call. The stock is up 21% over the last few days.
Interim CEO Michael Bender, a Kohl’s director who took the reins in May after the previous CEO’s surprise ouster, laid out his plans to get “back to growth.” But there are still many reasons to be cautious—and three big reasons these types of turnarounds are so challenging.
Cost-cutting takes a toll: The cost cuts and tight inventory, which tect margins, is giving Kohl’s financial breathing room to take another stab at turning itself around.
But some of the moves Kohl’s has made to tect fits can in fact hurt sales.
Lower inventory helps margins by reducing how much merchandise gets discounted if it’s not catching on with shoppers but it can also mean lost sales and visually unappealing empty shelves.
Leaner staffing means lower costs but can also mean messier stores, and long waits to check out that can frustrate a shopper and foment low morale among employees.
The competition is fierce: Turnarounds don’t happen in a vacuum. When one player is struggling, rivals capitalize on that weakness to grab market .
Last year, Kohl’s saw sales in every category it sells, except for the Sephora shops, fall by a double-digit percentage.
Kohl’s has lost millions of customers and its is 20% smaller than it was in 2019, while T.J. Maxx, Walmart and Target are much larger now.
Management is walking on a financial tightrope: Earlier this year, Kohl’s cut its dividend 75% to conserve money and this week, Bloomberg reported Kohl’s was asking for more time to pay some vendors—so it’s an open question on how much Kohl’s can spend on its turnaround.
“It’s not that management lacks the will to imve or the desire for change. The challenge lies in an inability to execute at an operational level,” says GlobalData managing director Neil Saunders.
There were some reasons for optimism in Kohl’s report on Wednesday.
Comparable sales were unchanged in July, and as CEO Bender struck many of the right notes that investors and employees a want to hear.
And while investors were no doubt relieved to see any good news at all, they must keep in mind that all turnarounds, the saga at Kohl’s remains a show-me story.—Phil Wahba CEO Daily via Diane Brady at diane.brady@fortune.comTop newsFortune unveils new vodcastFortune 500: Titans and Disruptors of Industry, a new vodcast hosted by Fortune’s Editor-in-Chief Alyson Shontell, debuted this morning.
Watch the first episode with Accenture CEO Julie Sweet here.Nvidia beats earnings expectations, but stock fallsNvidia was able to surpass Wall Street’s quarterly earnings expectations on Wednesday with $46.74 billion in quarterly revenue, a 56% increase year-over-year.
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Revenue from that unit missed expectations—one of the reasons the stock fell after the call. Some investors are now worrying that demand for AI chips may be to plateau, according to the WSJ.
The NYT has a different take: overall demand for the company’s ducts remains “robust,” especially as the company reported zero revenues from China and its topline revenues came in above expectations.
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The White House told Denmark to “calm down.”The S&P 500 futures were flat this morning premarket, after the index closed up 0.24% yesterday, another record high.
STOXX Europe 600 was flat in early trading. The U.K.’s FTSE 100 declined 0.3% in early trading. Japan’s Nikkei 225 was up 0.73%. China’s CSI 300 was up 1.77%. The South Korea KOSPI was up 0.29%.
India’s Nifty 50 was down 0.72% before the end of the session.
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