Here's how Kohl's is trying to fix its women's business - CNBC

A shopper prepares to pay for items at a Kohl's department store in Peru, Illinois, May 16, 2019.

Daniel Acker | Bloomberg | Getty Images

Kohl's knows its women's apparel business needs work. And it has a plan to try to fix it.

"Our women's business remained challenged throughout the year," CEO Michelle Gass told analysts during a post earnings conference call on Tuesday. "We recognize that we need a much more significant reinvention in women's to improve the trajectory moving forward."

The department store chain on Tuesday morning reported earnings and net sales for the fourth quarter that topped analysts' expectations. Year over year, however, its net income and net sales were down. Same-store sales, a metric that tracks sales online and at Kohl's stores open for at least 12 months, were flat during the holiday quarter.

Kohl's called out women's as one of three reasons its results did not meet its own internal expectations. The other two reasons, according to Gass, were weakness in the home category and overall pressure on gross margins due largely to heavy promotions.

Without going into details, Gass said Tuesday that Kohl's has put a new leadership team in place for its women's business.

She said Kohl's is making "bold moves" that include phasing out eight of its women's brands over the coming year, but didn't say which brands those are. It said it will provide more details during a March 16 meeting with investors in New York.

Meanwhile, Kohl's will be launching additional private labels and leaning into its strongest national brand partners, the CEO explained. Some of those include Under Armour, Nike and Adidas. She said Kohl's has been having more success in active and beauty, elsewhere in the store.

"First order of business for the women's team ... we have a new merchandising structure and a new team ... is to drive inventory management and reduce our choice count and increase depth," Gass told analysts.

Kohl's is adding more mannequins to stores, to give women ideas of how to dress "head to toe," she added, as one example of new merchandising efforts.

Fixing the women's category is not solely a Kohl's issue.

Macy's and J.C. Penney have cited similar obstacles. Fewer women are visiting department stores to buy clothes or buying less clothing altogether. More and more are turning to rental options, like Rent the Runway, to build out their work wardrobes. Or they are buying used clothes, via platforms such as ThredUp and Poshmark. Amazon is also becoming a bigger force in fashion. In turn, department stores are having to rely more on their private brands to try to stir up exci atement.

Women's apparel represents about 30% of Kohl's sales, according to estimates by Telsey Advisory Group, giving the company good reason to try to fix this business.

Kohl's shares were last up about 3%. The stock has fallen more than 43% over the past 12 months. Kohl's has a market cap of roughly $6.1 billion.

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Here's how Kohl's is trying to fix its women's business - CNBC
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