Kohl's sales fell 43.5% in the first three months of 2020 with coronavirus closing stores

The coronavirus and store closures cut Kohl's Corp. sales by 43.5% in the first three months of 2020 compared to the same period last year. 

Kohl's reported that its net sales in the first quarter of 2020 were $2.16 billion, down from around $3.8 billion during the same time in 2019. 

Kohl's closed all its 1,159 Kohl's stores and 12 FILA outlets in 49 states March 19. That brought a significant financial blow with store sales accounting for 75% of all sales in 2019. 

The Menomonee Falls-based retailer released its first-quarter earnings in filings with the Securities and Exchange Commission Tuesday. The company reported a net income loss of $541 million in the filing. It has around $2 billion in cash on hand. 

Kohl's stock closed Tuesday down more than7%, trading at $17.38 a share. At the beginning of the year, the company's stock was trading at $49.11.

Kohl's said it has reopened about half of its stores since May 4. About half of those stores opened Monday, the company said. It's fiscal quarter ended on May 2 — before stores started to reopen. 

“We have begun the rebuilding process, recently reopening about 50% of our stores across the country," Kohl's Chief Executive Officer Michelle Gass said in a news release. "In doing so, we have taken special care to equip our stores with the latest health and safety measures as we welcome back our associates and customers. As we look ahead, we know this experience will have a lasting impact to customer behavior and the retail landscape, and we are evolving our strategies to ensure our relevance and to capture market share.”

The retailer's open stores are operating for limited hours with social distancing measures, enhanced cleaning procedures and a new returns process. 

"We expect that we will be operating differently for quite some time," Gass said on a conference call with investors.

The company has opened stores in around 30 states as of Monday, representing about half of all 1,158 Kohl's stores. Wisconsin stores are only offering drive-up pickup at this time. Digital orders have not dropped off as stores reopened, Gass said. 

Stores that have reopened are operating at about half of normal productivity, Gass said on the call. As stores are open longer, Gass said sales have increased. 

"It's going to take some time," she said. Even with stores reopening, Kohl's will continue to offer drive-up pickup for purchases. With the reopenings, Kohl's is also restarting its Amazon returns program.

The store closures did help grow digital sales by 24% for the quarter. In the month of April, digital sales were up more than 60%. Homes sales like kitchen electrics and vacuums performed well digitally, Gass said on the call. 

Weak areas, like women's apparel, continued to under perform. The retailer is severing ties with eight down-trending brands — Dana Buchman, Jennifer Lopez, Mudd, Candie’s, Rock & Republic, PopSugar, Elle and Juicy Couture. It has introduced new products from Nine West and Elizabeth and James. It also has a new partnership with Dodgeville-based Lands' End starting this fall. 

With stores closed, Kohl's announced it would furlough the majority of its store associates and distribution center associates — about 85,000 employees. Those employees will remain furloughed until stores reopen. Health benefits will continue. 

The retailer said it planned to decrease its capital expenditures by half a billion dollars in late March. At the end of April, Kohl's issued a $600 million bond offering. 

Gass would not take a salary during this time, the company said in March. Her total compensation in 2019 was $8.98 million with $7.25 million in stock awards. Her salary was $1.4 million for the year, according to corporate filings. 

Kohl's ended 2019 with sales down overall 1.5%. The company eliminated around 250 positions in February as part of a companywide restructuring. 

“We entered the year in a strong financial position and our business was tracking to our expectations prior to the onset of the crisis," Gass said in the news release. "We immediately responded with actions to protect the health and safety of our associates and customers and to preserve our financial position. I am incredibly proud of how our associates stepped up to face this unprecedented challenge with speed and agility. Our actions to manage cash outflow and increase liquidity have been instrumental in enhancing our position to navigate this crisis, and we believe our history of prudent capital management will continue to serve us well."

The pandemic has brought tough times to an already fraught retail environment. Mall-based retailers J.C. Penney, J.Crew and Neiman Marcus have all sought bankruptcy protection during the crisis. 

The pandemic will have some longterm changes on the business like how the stores operate with additional safety precautions "whether or not this is for a year or forever." 

Sarah Hauer can be reached at shauer@journalsentinel.com or on Instagram @HauerSarah and Twitter @SarahHauer. Subscribe to her weekly newsletter Be MKE at jsonline.com/bemke.