Wisconsin-based specialty department store Kohl’s will close 18 under-performing stores in 2016, representing less than one percent of total sales. The specific locations will be announced by the end of March.
The closures are expected to generate annual Selling, General and Administrative Expenses (SG&A) savings of approximately $45 million and annual depreciation savings of approximately $10 million. The company currently expects to incur approximately $150 – $170 million in charges as a result of these planned closures and the organizational realignment at the company’s corporate offices which occurred earlier this month. The company also estimates that approximately $55 – $65 million of the charge will be recorded in the first quarter of 2016, with the remainder recorded in the second quarter.
“While the decision to close stores is a difficult one, we evaluated all of the elements that contribute to making a store successful, and we were thoughtful and strategic in our approach,” said Kevin Mansell, Kohl’s chairman, president and chief executive officer. “We are committed to leveraging our resources on our more productive assets. Importantly, we also wanted to provide the best options for our associates and are proud that every affected store associate will be offered a position at a nearby Kohl’s location, or if they prefer, a competitive severance package.”
As part of the company’s ongoing efforts to find new and innovative ways to drive sales, in 2016, Kohl’s plans to pilot a new smaller format Kohl’s store, opening seven of these stores in various regions around the country; add two additional Off-Aisle pilot stores in Wisconsin; and open 12 Fila outlet stores, which will mark Kohl’s first entry into the outlet space.
“We see exciting growth potential in the new stores and new formats that we are opening this year and are heavily investing in the health of our overall stores portfolio to continue to serve our current and future customers,” said Mansell. “A vital component of our omni-channel approach is to clearly understand the evolving retail environment and ensure that we are well-positioned to leverage our resources on productive projects.”