Kohl’s CEO Says the Retailer Has Made Mistakes

Summary

WSJ What’s News – Episode Summary: "Kohl’s CEO Says the Retailer Has Made Mistakes" Release Date: November 27, 2024

The latest episode of WSJ What’s News delves into significant developments across global politics, business strategies, and market movements. Hosted by Tracy Hunt and featuring insights from journalists Suzanne Kapner and Susan Pulliam, the episode provides a comprehensive overview of the day's top stories. Below is a detailed summary, organized into key sections, complete with notable quotes and timestamps for reference.

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1. China Releases Three American Detainees

Timestamp: 00:40

The episode opens with a major international development: China has released three Americans after years of imprisonment. This move marks a successful effort by the Biden administration to secure their freedom.

• Details:

  • Released Individuals: Mark Sweden, Kai Lee, and John Leung were serving sentences on espionage or drug charges.
  • US Stance: The US has long viewed Sweden and Lee as unjustly detained. Leung was sentenced to life in prison last year.
  • Future Developments: The men are en route to the US and expected to arrive within the next day. However, officials did not disclose the terms of their release or any potential exchanges.

• Additional Context:

  • A Chinese intelligence officer serving a 20-year sentence and an associate involved in trade secret theft were also released.
  • Political Implications: This releases coincides with speculations of a political comeback for former New York Governor Andrew Cuomo.

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2. Andrew Cuomo's Potential Political Comeback

Timestamp: 00:40

Former New York Governor Andrew Cuomo appears poised to re-enter the political arena, potentially aiming for a mayoral position in New York City.

• Background:

  • Resignation: Cuomo resigned in 2021 amid sexual harassment allegations and an impeachment investigation.
  • Current Activities: Registered to vote in Manhattan, Cuomo has engaged with potential donors and delivered speeches at local houses of worship.

• Future Plans:

  • Although a formal campaign hasn't been announced, a spokesperson indicated it is "premature" to finalize plans.

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3. Bomb Threats Targeting Trump’s Nominees

Timestamp: 07:04

Several of President-elect Donald Trump’s nominees for key government positions have been subjected to bomb threats and false emergency reports.

• Affected Nominees:

  • Brooke Rollins: Agriculture Secretary nominee.
  • Elise Stefanik: Trump’s nominee for Ambassador to the United Nations.
  • Lee Zeldin: Nominated to lead the Environmental Protection Agency.
  • Pete Hegseth: Defense Secretary nominee.

• Incident Details:

  • The threats occurred between the previous night and the morning of the report.
  • Response: The FBI and Secret Service are actively monitoring the situation.
  • Outcome: All nominees reported being unharmed.

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4. US Markets Experience Downturn Ahead of Holidays

Timestamp: 05:47

US stock indexes saw declines in light trading ahead of the Thanksgiving holiday, reflecting investor caution.

• Market Performance:

  • Nasdaq: Dropped by 0.6%, influenced by disappointing earnings from tech firms.
  • Dow Industrials & S&P 500: Both indexes retreated from recent highs.

• Market Closure: US markets will be closed on Thanksgiving and will close early on Black Friday.

• Outlook: Target and Kohl's are gearing up for Black Friday amidst a challenging retail environment.

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5. Retailers Target and Kohl’s Prepare for Black Friday

Timestamp: 05:19

The episode highlights contrasting strategies of two major retailers, Target and Kohl’s, as they approach the busiest shopping day of the year.

a. Target’s Strategic Partnership with Taylor Swift

Timestamp: 04:46

Target is leveraging a high-profile partnership with pop star Taylor Swift to boost Black Friday sales.

• Key Points:

  • Product Launch: Exclusive release of Taylor Swift's "ERAS Tour Book," recounting her record-breaking concert tour.
  • Sales Strategy: The initial print run of 2 million copies dwarfs last year’s best-seller, showcasing Target's high expectations.

• Notable Quotes:

  • Brian Cornell (Target CEO): "It's an exciting partnership partnering with Taylor Swift, which will be a traffic driver for our business during an important holiday period." (04:46)

• Unique Aspects:

  • Self-Publishing: Melissa Corinth notes, "She's self-publishing it so she's not going through one of the big commercial publishing houses, which is pretty rare for a book that has this high expectations." (05:19)
  • Marketing Tactics: Target plans to play Swift's music in stores to attract customers to the book displays.

b. Kohl’s Admits Strategic Missteps and Plans for Recovery

Timestamp: 06:33

Kohl’s has publicly acknowledged a series of strategic errors that have adversely impacted its sales, presenting a candid look at the challenges facing the retailer.

• Admitted Mistakes:

  • Inventory Control: Reduced private label brands and petite clothing, which were popular among consumers.
  • Store Layout Changes: Minimized the jewelry department to accommodate Sephora shops, deterring shoppers.

• Impact on Sales:

  • Financial Performance: Total sales fell by over 8%, with comparable stores down by more than 9%, starkly underperforming compared to peers like Macy’s and Nordstrom.

• Corrective Measures:

  • Restoration Efforts: Reintroducing jewelry in 200 stores, expanding private label offerings, and bringing back petite sizes.
  • Leadership Change: Announcement of CEO Tom Kingsbury stepping down in January, with Ashley Buchanan from Michaels Companies set to succeed him.

• Black Friday Expectations:

  • Suzanne Kapner provides a nuanced outlook: "It should be a generally good weekend kicking off the holiday season. But there is some concern... consumers have been very value focused when they're spending more on groceries." (08:14) This implies that while there is potential for recovery, Kohl’s faces significant challenges in reclaiming lost market share.

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6. Exclusive Report on Chinese Vessel Sabotage

Timestamp: 09:05

In an exclusive report, the podcast investigates suspicions surrounding a Chinese commercial vessel accused of intentional sabotage.

• Incident Details:

  • Allegations: The vessel reportedly dragged its anchor over 100 miles along the Baltic seabed, severing critical data cables.
  • Response: European warships have surrounded the ship in international waters for a week as investigations proceed.

• Possible Motives:

  • Russian Involvement: Investigators are probing whether Russian intelligence influenced the captain to carry out the act.

• Company Cooperation:

  • The ship's Chinese owner has cooperated with authorities, allowing the vessel to be stopped. Russia has denied any wrongdoing.

---

7. WSJ Investigation: Environmental Issues at Tesla’s Gigafactory

Timestamp: 09:05

Susan Pulliam reports on environmental concerns at Tesla’s Gigafactory in Austin, Texas, challenging Elon Musk's reputation as an environmental champion.

• Key Findings:

  • Wastewater Management: The facility employed an evaporation pump pond to dispose of construction water from areas like the paint shop.
  • Chemical Disposal: Hazardous chemicals were dumped into the pond without proper treatment.
  • Regulatory Violations: Tesla did not inform the city water authority about discharging untreated water into the sewer system, as required.

• Implications:

  • Regulatory Scrutiny: The self-reported violations indicate potential lapses in environmental compliance.
  • Company Response: Under pressure from regulatory bodies and public scrutiny, Tesla faces challenges in maintaining its environmental commitments.

• Further Information:

  • The episode directs listeners to the Tech News Briefing podcast for an in-depth discussion on Tesla’s environmental practices and regulatory responses. (10:54)

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Conclusion

Timestamp: 09:05

The episode wraps up by summarizing the day's key developments, emphasizing the strategic maneuvers of major retailers like Target and Kohl’s amidst a fluctuating market, significant political shifts, and ongoing international tensions. Listeners are reminded of the upcoming Thanksgiving closure and the implications for holiday sales.

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Notable Quotes:

• Suzanne Kapner on Kohl’s Mistakes: "They were trying to do more with less. And that turned out to be a mistake." (06:33)

• Melissa Corinth on Taylor Swift’s Publishing Strategy: "She likes to control the access to her content... they don't have to discount the title because there's no competition for it." (05:19)

• Susan Pulliam on Tesla’s Environmental Issues: “They were sending it through to Austin Water untreated.” (10:16)

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This comprehensive summary encapsulates the episode's critical discussions, providing listeners and readers with a clear understanding of the topics covered without needing to access the original podcast.

Transcript

[Tracy Hunt]

Did you know? Wall Street Journal's take on the Week, a weekly markets and business podcast, is available on Amazon Music ad free with a Prime membership. To listen, download the Amazon Music app for free to catch up on the latest episodes without the ads. Taylor Swift's new book is going on sale exclusively at Target, giving the retailer a boost for the holiday season. And Kohl's CEO offers up a mea culpa for the department store's recent strategy.

[Suzanne Kapner]

CEOs are paid to be right and they don't like to admit when they're wrong. So it is a bit unusual to see a CEO really owning up to mistakes and promising to change direction.

[Tracy Hunt]

Plus China releases three Americans after years in prison there it's Wednesday, November 27th. I'm Tracy Hunt for the Wall Street Journal. This is a PM edition of what's the top headlines and business stories that move the world? China today released three Americans after years of imprisonment, marking the successful conclusion of an effort by the Biden administration to secure their freedom. Mark Sweden, Kai Lee and John Leung had been serving sentences on espionage or drug charges. The US had long designated Sweden and Li as unjustly detained. Leung had been sentenced last year to life in prison, officials said. The three men were flying home and were expected back in the US within the next day. Officials declined to say whom the US Sent back or if it had taken other steps in exchange. But according to the Bureau of Prisons database, a Chinese intelligence officer who had been serving a 20 year sentence in a US prison and a man he had worked with to steal trade secrets were no longer in U.S. custody today and in U.S. politics is a comeback on the horizon for Andrew Cuomo, according to people familiar with the matter. A longtime ally of the former New York governor has spoken spoken with potential donors about setting up a big money group that could boost a potential run for mayor of New York City. Cuomo, a Democrat, resigned back in 2021 in the wake of a sexual harassment scandal and an impeachment investigation. He is denied wrongdoing this year. Cuomo, registered to vote in Manhattan, has made speeches at houses of worship in the city and met privately with officials and labor leaders. A spokesman for Cuomo says it's premature to talk about a formal campaign. Several of President elect Donald Trump's nominees for top government posts said they were targeted with bomb threats or false emergency reports that sent police teams rushing to their homes this week. They include agriculture secretary nominee Brooke Rollins, New York Representative Elise Stefanik, Trump's nominee for ambassador to the United nations and Lee Zeldin who Trump picked to head the Environmental Protection Agency. All three said they were unharmed, according to a person familiar with the incident. Pete Hegseth, Trump's pick for defense secretary, was also the target of a bomb threat to his home. A Trump campaign spokeswoman said. The incidents occurred between last night and this morning. A law enforcement official said the FBI and Secret Service were monitoring the threats. Major indexes fell in sparse US Trading ahead of the holiday. The Nasdaq led declines, dropping 0.6% after disappointing earnings from computer and software companies. The Dow Industrials and S&P 500 pulled back from recent records. US markets will be shut for Thanksgiving and will close early on Friday. Coming up Target and Kohl's are heading into Black Friday in the middle of a tough stretch for both retailers, but Target is getting a boost from one of the country's biggest pop stars. That's after the break. Target is betting that Taylor Swift's newest release, the ERAS Tour Book, will turn Black Friday into a red letter day. Welcome to the ERAS Tour. Swift is exclusively selling her book, which recaps her record breaking concert tour at the retailer. It's one of the biggest publishing coups of the year and comes at a tough time for Target. It's been struggling with declining earnings and weak sales, losing grounds to the likes of Walmart and Amazon as consumers focus on staples like groceries rather than trendy home goods and fashion. Target CEO Brian Cornell said last week during the company's earnings call that the book was an exciting partnership partnering with.

[Susan Pulliam]

Taylor Swift, which will be a traffic driver for our business during an important holiday period.

[Tracy Hunt]

Swift and Target have huge expectations. The Wall Street Journal reported that the initial print run for the book is 2 million copies. To put that in context, according to Circana Bookscan, the biggest selling book of 2023, Colleen Hoover's It Ends with Us sold nearly 1.3 million print copies. Melissa Corinth, a deputy bureau chief with our media team, says the deal is an unusual one in the book industry.

[Melissa Corinth]

She's self publishing it so she's not going through one of the big commercial publishing houses, which is pretty rare for a book that has this high expectations. She likes to control the access to her content. She likes to know who's getting it and where and how and that she has final say over things. They also don't have to discount the title because there's no competition for it, so it can stay at that $39.99 price point all the way through.

[Tracy Hunt]

And to help drive customers to the book displays on Friday, Target will pump Swift's music in its stores. And speaking of retailers feeling the Black Friday pressure, Kohl's is heading into the biggest shopping day of the year with some coal in its stocking. Earlier this week, the department store chain posted a disappointing earnings report and told investors it expected sales for 2024 to decline by 7 or 8%. Outgoing Kohl CEO Tom Kingsbury even owned up to a series of missteps that have sent sales sliding. Suzanne Kapner writes about the retail industry for the Wall Street Journal. So, Suzanne, what went wrong at Kohl's?

[Suzanne Kapner]

Well, they made several mistakes. They were trying to control their inventory, so they cut back on their private label brands, which are very popular with their consumers. They cut back on petite clothing. And as he said in his words, they were trying to do more with less. And that turned out to be a mistake. And another misstep was that they scaled back their jewelry, their fine jewelry departments to make way for Sephora shops in their stores. And that really turned off shoppers as well.

[Tracy Hunt]

And how did that affect Kohl's most recent results?

[Suzanne Kapner]

These missteps really pushed down sales for them. They had a terrible quarter with total sales down more than 8%. Comparable stores down more than 9%. Really, really bad considering Macy's was only down about 2.4%. Nordstrom reported a 4% increase. So they're definitely an outlier in their performance.

[Tracy Hunt]

The retailer says it's already begun making some changes. What should shoppers expect to see if they go to Kohl's this weekend?

[Suzanne Kapner]

They've started adding jewelry back to stores. They now have departments in 200 Kohl's stores, and they are flowing in more private label brands, which they say already is helping to improve sales. And they are also expanding their petite sizes again in stores. So they're course correcting on a lot of these issues. They announced also this week that Kingsbury will be stepping down in January. And they have named Ashley Buchanan, who currently is the CEO of Michaels Companies, as their new CEO starting in January. And so there's going to be a bit of transition happening next year.

[Tracy Hunt]

What kind of Black Friday are we expecting this year?

[Suzanne Kapner]

It should be a generally good weekend kicking off the holiday season. But there is some concern. Customers have been very value focused when they're spending more on groceries. That just leaves less to spend on other discretionary items that you'd buy for the holidays, whether it's a cashmere sweater or a new coat or what have you. So the National Retail Federation is forecasting a slight increase in overall spending for November and December, but it's the lowest pace of growth since 2018.

[Tracy Hunt]

And how does Kohl's fit in?

[Suzanne Kapner]

They are coming into the season from a very weak position and they have some catch up to do. They have been losing share to other players and it remains to see whether they can win some of those customers customers back.

[Tracy Hunt]

That was our reporter Suzanne Kapner. Thanks so much, Suzanne.

[Suzanne Kapner]

Thank you.

[Tracy Hunt]

We exclusively report that investigators suspect the crew of a Chinese commercial vessel deliberately dragged its anchor along the Baltic seabed for more than 100 miles to cut critical data cables. The ship has been surrounded by European warships in international waters for a week. Investigators are trying to determine whether Russian intelligence induced the captain of the ship to carry out the sabotage. People familiar with the investigation said the ship's Chinese owner is cooperating and allowed the ship to be stopped. The company declined to comment. Russia has denied wrongdoing. And finally, Tesla CEO Elon Musk is considered a champion of the environment for his role in pioneering the electric car industry. But a new WSJ investigation uncovers an account of environmental problems at his companies, especially at Tesla's Gigafactory in Austin, Texas, one of the biggest car factories in the world. Our reporter Susan Pulliam spoke with former Tesla employees and reviewed regulatory documents and she told WSJ's tech news briefing podcast about what she found.

[Susan Pulliam]

Yes, so there were a couple of issues having to do with wastewater in Austin. One was what they called an evaporation pump pond, where they were basically dumping water from construction in other areas of the plant, for instance, the paint shop. Certain chemicals were being put in the pond. And the issue with the pond was that they didn't tell the city water authority that they were discharging the water from the pond into the city's sewer system without having treated it. If they taken out the pollutants or accounted for them, it would have been a different story, but they were sending it through to Austin Water untreated. They self reported this to the city.

[Tracy Hunt]

To hear more about Tesla's alleged environmental violations and how the company and regulators have responded, check out this morning's episode of our Tech News Briefing podcast. And that's what's news for this Wednesday afternoon. Heads up before we go, we'll be off tomorrow for Thanksgiving and we'll have just a morning show for you on Friday. Today's show was produced by Anthony Bansi with supervising producer Talia A.R. bell. I'm Tracy Hunt for the Wall Street Journal. Thanks for listening.