Retail is a tough industry in the best of times. Operating during heightened inflation adds another challenge to the sector. Retail Dive took a look at companies that have had a tumultuous or tenuous year, those that need a turnaround – or are in the midst of one – or retailers that have seen substantial C-suite turnover.
In some instances, companies experienced all of the above. And they could really use an end-of-year win. Here, in no particular order, is our qualitative roundup of five retailers that might be at risk next year if they don’t achieve a strong operational and financial finish this holiday season.
1. Joann
Throughout the year, Joann’s financial performance hasn’t been exceptionally strong.
In December last year, Joann recorded a loss and suspended its dividend payments to improve liquidity. At the same time, the retailer said it had crafted a $200 million cost reduction plan that it hopes to realize by 2025. About half of those savings are expected to come from lower supply chain costs. In March, the company said it borrowed the full $100 million available under a first-in, last-out facility. It used the FILO loan and cash on hand to repay some of its borrowings under an asset-based revolving loan.
Joann had about $1.1 billion in long-term debt at the end of Q3. The company faced a delisting notice from the Nasdaq as its stock was trading below $1 at the time this story was published.
In May, President and CEO Wade Miquelon retired. In September, the company restructured and laid off an undisclosed number of people. In its most recent earnings, Joann’s top-line sales gained post-Black Friday momentum. The company also raised its previously stated cost savings goal to $225 million. “But one seasonal push may not necessarily be enough to save the retailer that has been cash-strapped for some time and suffocating under the weight of its debt,” Creditsafe spokesperson Ragini Bhalla said.
In December, Joann reported net sales declined by 4.1% from last year to $539.8 million. Total comps sales fell 4.1%, while e-commerce sales rose at a rate of 11.5% compared to last year, accounting for 13.1% of total company net sales.
2. Express
Express debuted 43 years ago in a different era of retail and apparel. But as the worst of the pandemic waned, so too did interest in the company’s main offering. Business casual was out and athleisure was in. Along the way, experts and analysts told Retail Dive earlier this year that Express lost brand awareness.
Last December, Express announced an intellectual property joint venture with brand management firm WHP Global. However, the company’s poor financial performance has persisted. In Q1, the company’s net sales fell 15% to $383 million from $451 million a year ago. Comp sales for the quarter also fell 14%, and the company posted a quarterly loss of $73.4 million, a sharp year-over-year rise. On the news that sales fell 6.4% in Q2 to $435.3 million, the retailer also announced cost-cutting and borrowing initiatives, which included slashing jobs. Third-quarter results were better, with net sales rising 5% to $454.1 million, up from $434.1 million a year ago, thanks to the acquisition of Bonobos from Walmart. E-commerce also rose 10%.
Express planned to cut 150 jobs during Q3. The move was part of plans to reduce annual expenses by $200 million by 2025. The retailer this year also saw noteworthy leadership turnover.
Chief Operating Officer Matthew Moellering retired in May and Chief Merchandising Officer Malissa Akay exited in July. In September, CEO Tim Baxter resigned; Stewart Glendinning replaced him. And the following month, CFO Jason Judd left. The retailer also completed a reverse stock split.
The company during the third quarter said it plans to pursue an international brand expansion. Recently appointed CEO Glendinning acknowledged during the Q3 earnings call that Express made some past merchandising missteps. They included a women’s offering that was out of balance across categories and price points. Looking forward, “each one of the parts of our business” will play a role in Express’ turnaround, Glendinning said during the call.
3. Qurate Retail Group
The parent company of QVC and HSN began the year by laying off 400 people. The move generated $60 million in savings. In Q2, Qurate Retail Group sold its Zulily e-commerce unit to an investment firm. Under that deal, Qurate repaid Zulily’s $80 million in outstanding debt. That move was meant to optimize the company’s brand portfolio.
During Q3, Qurate’s retail revenue fell 3% to $2.5 billion (excluding Zulily). On the upside, the company did lower its line of credit debt balance by $435 million using operating cash flow and insurance proceeds paid following a deadly fire at a now-closed distribution center in North Carolina.
CEO David Rawlinson said during the company’s most recent earnings call that Qurate is focused on managing inventory and lowering supply chain and operating costs as part of efforts to improve performance. “Going into Q4, we are cognizant of the challenges from inflation, interest rates and geopolitical events,” Rawlinson said, according to a call transcript. “We remain steadfast in our transformation.”
4. Walgreens
Walgreens experienced a roller coaster year when it came to finances and operations.
The company’s growing U.S. healthcare segment boosted financial performance, driving the business to $34.9 billion in Q2 sales. But the company missed analysts’ earnings expectations for Q3, achieving $35.4 billion in sales. In May, the company said it planned to lay off 500 workers in a bid to focus less on retail and more on its healthcare operations.
Walgreens lowered its full-year outlook in June. That same month, the company said it planned to close 150 U.S. stores and 300 locations in the U.K. The closures were part of a cost-cutting effort that has repeatedly seen its target number increase. With that round of closures, the company projected $800 million in savings in 2024, for an accumulation of $4.1 billion. Then again in November, Walgreens confirmed it planned to lay off 5% of its corporate workforce.
The retail pharmacy company also saw noteworthy turnover in its C-suite this year. Former CFO James Kehoe resigned in July; Manmohan Mahajan was named interim CFO. CEO Rosalind Brewer left in September. The company named Tim Wentworth to replace Brewer. Chief Information Officer Hsiao Wang left in October after a year at Walgreens. Then in November, Chief Medical Officer Kevin Ban stepped down, effective immediately. It remains unclear how the new leaders may move to reshape Walgreens as it continues to navigate various challenges.
5. Kohl's
Kohl’s began the year with the layoff of about 60 at its corporate headquarters. The move followed a sales slowdown at the end of last year where revenue fell 7% to $4.3 billion. In Q1, net sales fell, and as the company moved into Q2, profits plunged and its performance slid again in Q3, with net sales falling 5.2% and comp sales falling 5.5% year over year.
A year ago, Kohl’s moved to add Sephora store-in-stores to all locations. Kohl’s thinks the move can add $2 billion in sales by 2025. “We continue to be extremely happy with our partnership with Sephora and with the results that we are achieving. Based on our success, we have increased confidence that Sephora at Kohl's will be a $2 billion business by 2025,” CEO Tom Kingsbury said during the latest earnings call, according to a transcript.
Also during the call in November, Kingsbury acknowledged weakness in the retailer’s e-commerce segment. Kingsbury said Kohl’s “digital business is really what’s bringing us down.” The retailer’s digital sales declined 16.5% in the third quarter. In response, Kingsbury said the company moved to establish its stores as a key brand focal point this year. That comes as President and COO Dave Alves left the company in November after less than a year in the role.
The retailer is also heavily apparel-focused. Going forward, Kingsbury said Kohl’s is looking to “de-weather” its business to grow sales in less weather-sensitive categories like beauty and home. “We're obviously repositioning the company, and we're building in all these initiatives that are really just getting started,” CFO Jill Timm said during the last earnings call in response to an analyst’s question on how the company expects a range of new initiatives to perform.
