Kohl’s layoffs are the latest sign of the department store industry’s challenges

The trend: Department store chains have yet to find a winning formula to revitalize the struggling model after sales in the category fell 1.3% YoY last year, per the US Census Bureau.

The latest example: Kohl’s—after 11 consecutive quarters of declining sales and a 54% drop in market cap over the past year—will lay off approximately 10% of its corporate workforce, per The Wall Street Journal. Half of the reductions will come from unfilled positions.

Kohl’s will also shutter 27 underperforming stores and an ecommerce fulfillment center.

Kohl’s challenge: As CEO Ashley Buchanan takes the helm and charts a course to revive the struggling department store chain, he must balance the competing interests of two different demographics:

• On the one hand, Kohl’s is courting new, younger customers who were enticed by the retailer’s partnerships with Sephora, Babies R Us, and Limited Too.
• On the other, it’s trying to rebuild a loyal, older customer base that was turned off after Kohl’s removed some private-label brands, cut petite clothing sizes, and scaled back its fine jewelry selection.

There’s no silver bullet: Plenty of department stores are throwing spaghetti at the wall to see what sticks, but so far, the floor is a lot messier than the wall.

• JCPenney merged with Sparc Group—owner of brands like Lucky, Aeropostale, Eddie Bauer, and Brooks Brothers—to form a company called Catalyst Brands. The new entity aims to use data from roughly 60 million customers to deliver personalized shopping experiences, unify loyalty and credit card programs, and drive cross-brand sales.
• Macy’s will close 66 stores this year as part of its “Bold New Chapter” turnaround strategy, which is focused on making its assortment more relevant to shoppers, upgrading stores, and rethinking its store mix. However, the soon-to-be-shuttered stores include some off-price Macy’s Backstage and small-format Market by Macy’s locations that the retailer had been betting on to turn around its fortunes.
• The owner of Saks Fifth Avenue is in the process of buying Neiman Marcus to strengthen the combined company’s leverage with suppliers, streamline operations for cost savings, and bolster the fledgling Saks Media Network, which is trying to carve out a unique niche by offering brands exclusive access to a highly affluent consumer base.
• Nordstrom’s founding family is partnering with the Mexican department store chain El Puerto de Liverpool to take the company private. The move would allow Nordstrom to make long-term investments without the pressure of immediate returns.

Our take: Department stores need a reboot.

While they were once the go-to “everything stores,” they no longer need to, or should, fill that role. While broad appeal remains essential, success may lie in sharpening their focus—especially to attract younger consumers who enjoy in-store shopping.

Go further: Read our analysis of department stores’ Q3 results in our Retail & Ecommerce Earnings Q3 2024 report.

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