The news: While Kohl's Q4 revenues fell 3.9% and comp sales dipped 2.8%, CEO Michael Bender says the company ended the year in a “stronger position than we started,” adding that “important work [is] still ahead of us.”

But the company’s Q4 net sales of $4.97 billion were nearly 27% below 2017 levels. Comp sales fell by more than twice what analysts expected, and the retailer “lost competitive ground during high-traffic shopping windows, including Black Friday, Cyber Monday and the week following Christmas,” according to its earnings presentation.

Looking ahead: Despite the optimistic tone, the department store chain remains in a deep hole after years of sales declines and executive upheaval, including the firing of CEO Ashley Buchanan for cause last year following an internal investigation that found he violated company policies by directing business to a woman with whom he had a romantic relationship.

With Kohl’s saying its “core low- to middle-income customers continue to face financial pressure” and are growing more value-conscious, the retailer is leaning into consistent, differentiated, value-focused messaging. That includes a broad marketing push centered on its proprietary brands. For example, online messaging for its Jumping Beans kids’ pants highlights functional details such as reinforced knees.

Implications for Kohl’s and other retailers: Kohl’s core customer base of middle-income consumers may feel pressured, but they are still spending. The question is whether Kohl’s can capture those dollars by delivering the right mix of products at the right price points at the right time. For years, execution missteps have caused those customers to drift elsewhere.

In a challenging retail environment, the battle for limited consumer dollars is fierce. And despite Kohl’s upbeat tone, its outlook suggests caution: The company expects comp sales to range from a 2% decline to flat. Unless Kohl’s can better meet customers’ needs—and clearly communicate why it’s worth choosing—it is likely to see sales continue to erode.

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