Dive Brief:

• Kohl's laid off about 15% of its corporate employees as the retailer tries to "further align its cost base in response to the business impact resulting from the COVID-19 pandemic," the company said in a securities filing.
• The job cuts will save an estimated $65 million a year, while adding one-time costs of $23 million for 2020, Kohl's said.
• All told, Kohl's expects to save about $100 million a year from various restructuring actions it has taken this year, including cuts announced in February.

Dive Insight:

Department stores are among the hardest hit retailers from COVID-19 disruption. Moody's analysts have estimated operating profit for the sector could fall by some 200% this year as the spring's store closures, continued sales declines and discounting take their toll. 

Despite several advantages, Kohl's has suffered along with its sector. A RapidRatings "stress test" from the summer found that the retailer's financial health could be among the hardest hit in the industry if Kohl's faces prolonged sales declines. 

Not that long ago, Kohl's served as a modest success story in the troubled department store space after engineering a turnaround that appeared, for a time, stable and lasting. But in recent years the retailer has struggled to maintain growth. Kohl's kicked off the year on a lackluster note, reporting a slight decrease in sales for the holiday period, which followed a disappointing performance in the third quarter of last year. In February, the retailer announced it would slash 250 jobs to cut costs and boost profits amid tepid sales.

Then came the pandemic, store closures and a massive hit to revenue and profit. The retailer responded by drawing down its credit line, slashing dividends and stock buybacks, furloughing employees, and cutting costs.

Those moves helped the retailer weather the closure of its stores. But even after re-opening, sales have remained down despite strong digital growth.

A 15% gash to its corporate workforce is a dramatic move for Kohl's. Credit Suisse analysts led by Michael Binetti said in an emailed note, "While the cuts were no doubt a difficult situation ... unfortunately we think it was prudent for [Kohl's] to make that tough call heading into the post-COVID reality."

Binetti also said Kohl's was "better situated" to manage the post-pandemic world compared to its peers in the department store sector and also to gain share from the rash of bankruptcies in the space, among them J.C. Penney, Stein Mart and Stage Stores. (Though he noted his team had a "hunch that offprice will be the biggest winners.")

In its favor, Kohl's operates largely outside the enclosed mall, has a strong financial profile and balance sheet, has made investments in omnichannel operations and its supply chain, and is continually working to improve its assortment, including through merchandise partnerships.