Kohl's (KSS) Has a Plan to Tackle the Ongoing Retail Catastrophe

Being a retailer in 2019 wasn't exactly easy. There was the ongoing rise of Amazon (NASDAQ: AMZN), various other online retailers were nipping at its heels, and getting people to actually deign to walk into a brick-and-mortar outlet was starting to look like the labors of Hercules. Then 2020 hit, and being a retailer was next to impossible. If you were a physical-only retailer, it was completely impossible for a while. This has left retailers scrambling to try and make up lost ground, and for some, that's proving harder than others. Kohl's (NYSE: KSS), however, seems to have a plan to address this potential killer in retail, and there's something to be said for it.

Kohl's Lays Out its Battle Strategy Like Sweaters on Display

The difficulties of retail haven't been lost on Kohl's, and a lot of its newest strategy was actually set up from before the worst of coronavirus kicked in. First, Kohl's had largely abandoned the shopping mall in favor of stores set in strip malls. These allowed Kohl's to split the difference in retail presentation: sharing space with other stores allowed for some halo-effect gains in foot traffic, but without the enclosed, boxed-in nature of a mall.

In that vein, Kohl's also turned some of its stores into malls in miniature, adding “store-within-a-store” concepts like Planet Fitness (NYSE: PLNT) outlets, or even hosting Aldi grocery stores. Additionally, Kohl's has made advances in reducing its inventories, while still trying to keep what customers wanted to buy readily available.

Perhaps the biggest development for Kohl's comes under the “if you can't beat 'em” heading; Kohl's actually serves as a physical retail drop-off point for Amazon customers to return items and get quick refunds. While there isn't a whole lot of data as yet on how many Amazon returns patrons are becoming Kohl's shoppers while they're there and they've got cash on hand to spend, even one such shopper was one more than Kohl's might have had under normal circumstances.

Let's Hear it For Kohl's Rainbow Tour!

The good news is that these strategies are lending Kohl's a hand. The chain did see a pretty catastrophic drop in sales for the first quarter; sales were down 44%, reports noted. Moreover, the company hit a 52-week low in its share price on April 3, and that after it hit a 52-week high back on November 15.

Yet if you ask if Kohl's plan was a success, the answer must at least be “a qualified yes.” Why? Because everyone else in the field that wasn't Amazon, Walmart (NYSE:WMT) or Target (NYSE:TGT) was having an utter disaster. Three major brands have filed for bankruptcy protection, including Stage Stores (NYSE:SSI), JCPenney (NYSE: JCP), and Neiman Marcus, who has been on a death watch for weeks as we've been tracking its ongoing will-it-won't-it bankruptcy filing plans.

Those who aren't bankrupt outright are engaging in last-ditch efforts aplenty; reports note Lord & Taylor (OTCMKTS: HBAYF) is looking at a liquidation sale, and Macy's (NYSE: M) spent weeks frantically trying to raise capital to try and get it over the coronavirus hump.

The fact that Kohl's can walk away with nothing more than a 44% drop in sales for the quarter—which is fairly likely to turn around with the reopening of the world economy—is actually a minor miracle in its own right.

No Initial Plan Ever Survives Contact With the Enemy

“No plan of operations extends with any certainty beyond the first contact with the main hostile force.” That's from Helmuth von Moltke the Elder, and it goes all the way back to his book, “On Strategy” written in 1871. It still holds true, for the most part, and Kohl's has demonstrated as much. Kohl's has managed to survive in perhaps the worst retail market since the Great Depression, a market so disastrous that stores were forbidden to open by government mandate. Remember that, not so long ago, UBS was calling for 100,000 stores to close for good in the US by 2025.

Kohl's has definitely come out stronger than a lot of its adversaries in the retail space. While retail is indeed coming back—retail sales saw their single biggest monthly jump in US history at 17.7%—the comeback is likely to prove long and difficult overall, and with fewer options than normal too. Kohl's has come out the other side, and that gives it a certain respectability, but now Kohl's has to figure out how to keep the land it took, so to speak, and maintain—or even improve—its position in the field. And its current plans for recovery may, or may not, be enough.