By taking the command of Kohl’s Corp., Tom Kingsbury has one tough assignment: turning around a $19 billion company that has been losing market share for several seasons amid a softening retail business climate.
Kingsbury, who last Thursday was anointed chief executive officer after serving as interim CEO since December, is bound to stick to the same overall strategy, more or less, set by his predecessor Michelle Gass. She was pressured by activist shareholders to leave and managed to land as president of Levi Strauss & Co.
Gass was instrumental building Kohl’s as a destination for active and casual assortments, introducing such brands as Cole Haan, Calvin Klein, Lands’ End and Under Armour, and for the rollout of Sephora shops inside Kohl’s stores, which continues. She also last year set in motion a strategy for scaled-down, smaller Kohl’s stores. None of the strategies have had enough time to fully kick in.
Last November, Kohl’s pulled its outlook for the year and pointed to a sharp slowdown in consumer spending. At the time, Peter Boneparth, the independent chair at Kohl’s, told analysts on a conference call that operating without an explicit profit and sales promise would give Kingsbury “the latitude in the fourth quarter to execute on our basic strategy.” Kohl’s is scheduled to post its fourth-quarter and 2022 results on March 1 when Kingsbury for the first time should provide some sense of his agenda for the company. Last week, Kohl’s disclosed 60 layoffs at its corporate headquarters.
As some sources have suggested to WWD, Kohl’s does have some opportunities for growth, particularly in private label, which it needs to bolster more than it has in the past and would provide wider margins and more fashion differentiation. There could also be a better balance to the casual offerings with more wear-to-work and occasion styles, and an effort to refresh stores, many of which appear dated.
There could be an opportunity to extend the Kohl’s partnership with Amazon, which is limited to returns but could involve other services. Gass has said many customers returning Amazon orders at Kohl’s are also shopping the stores, and that Amazon and Sephora have been attracting customers new to Kohl’s.
The Menomonee Falls, Wisconsin-based retailer did start opening small-store formats that Gass said were successfully piloted. They feature “zones” for diverse, female-owned and emerging brands; test self-serve return drop-offs; test self-checkout, and reflow key active and casual brands in proximity to the in-store Sephora shops for better exposure. The company is continuing to roll out self-serve stations for picking up online orders and already offers the ability to drive up and pick up packages. The average Kohl’s store of around 80,000 square feet is too large for many small markets. By introducing smaller format stores, most at about 35,000 square feet, Kohl’s gains flexibility to enter new neighborhoods.
On the fashion side, Kohl’s has been criticized for lacking distinction, even with its focus on casual, active and athleisure, and has been too dependent on national brands that can be found at many other stores. Kohl’s in 2019 did launch an emerging brand program and introduced dozens of brands new to the store and less widely distributed, among them Colors for Good, Superfit Hero, Roam Loud and Yummy Sweater Co. There’s room to project a more youthful image, and one that’s more relevant to prevailing social issues.
Kingsbury has been a board member and became Kohl’s interim CEO on Dec. 2, when Gass left to become president of Levi Strauss. Kingsbury will continue to serve on the company’s board.
“This is a pivotal time for Kohl’s, and I am excited and energized to work with our talented team to elevate our performance and create value,” Kingsbury said in a statement.
Kohl’s also disclosed late Thursday afternoon that it entered into a cooperation agreement with Macellum Advisors, the shareholder activist group that pushed for Gass’ departure following several seasons of declining performance by the business and its stock price. Macellum agreed to a multiyear standstill, voting and other provisions, which will enable management to focus more squarely on improving the company’s performance.
Michael Bender, independent director and chair of the board’s nominating and ESG committee, said: “The board appreciates our constructive dialogue with Macellum during the last few months and their engagement as we conducted the CEO search process. We look forward to their continued support and partnership.”
Jonathan Duskin, managing member of Macellum, remarked: “We are very excited about the future of Kohl’s under the leadership of Tom and have the utmost confidence in his ability to maximize shareholder value.”
Macellum was instrumental in bringing Kingsbury to Kohl’s. The activist shareholder had been pushing for changes on the Kohl’s board and in April 2021 reached an agreement with the board to bring in three new members: former Lululemon CEO Christine Day, Margaret Jenkins, and Kingsbury, who had retired from Burlington, the off-price chain.
The 70-year-old Kingsbury is a 40-year-plus retail industry veteran who elevated Burlington from a sleepy off-pricer into a top performer in the discount sector that has become increasingly competitive against TJ Maxx and Ross Stores.
Kingsbury joined Burlington in 2008, took the company public in 2013, and the stock rose from its opening $25 share price to more than $200 a share during his tenure. He left the company in September 2019.
Prior to Burlington, Kingsbury served as senior executive vice president, information services, e-commerce, marketing and business development at Kohl’s from 2006 to 2008. Before joining Kohl’s, Kingsbury held management positions with the former May Department Stores Co.
“Tom’s exceptional track record growing retail businesses and his deep knowledge of Kohl’s makes him the right choice for Kohl’s next CEO. Since joining the board, Tom has added valuable insight and perspective, and as interim CEO, he has demonstrated strong leadership and made a meaningful and positive impact on the organization,” Boneparth said in a statement.
In a note on the Kohl’s CEO change, Neil Saunders, managing director of GlobalData, wrote: “The appointment of Tom Kingsbury as permanent CEO of Kohl’s is arguably the safe choice for a business that is currently being battered by a tougher economy and its own internal missteps. Mr. Kingsbury has significant experience in retail and has a good knowledge of Kohl’s so will, hopefully, be able to stabilize the business over the course of the year ahead.”
Saunders said the standstill agreement with Macellum “will give the new CEO a chance to catch his breath and make necessary changes. We are also concerned that Kohl’s may have agreed to consider various measures, such as selling off real estate, which activists have long wanted. We retain our view that these kinds of actions are not in the long-term interests of the company.”