Shoppers walk outside a Kohl’s store in Mount Kisco, New York.
Scott Mill | CNBC
Kohl’s Shares plunged more than 20% on Thursday after the company posted a surprise loss per share, well below Wall Street’s expectations for a slight profit.
This stock drop created the stock’s largest single-day percentage decline ever.
In an interview with CNBC, CEO Tom Kingsbury attributed the slower sales to difficult comparisons. He said the department store saw higher-than-usual inventory clearances in the same period last year as it tried to clean out inventory and jump-start its turnaround plan.
He added that sales trends started the quarter strong in January and February but weakened in the final five weeks of the period as customers held off on purchasing seasonal goods such as clothing for spring due to poor weather. He said: “Fortunately we are seeing it reoccur as the weather improves.”
Among investors, Kohl’s weak results have raised questions about the company’s turnaround strategy. Led by Kingsbury, the former market leader of the off-price chain Burlington StoresKohl’s has tried to attract shoppers by adding fresh merchandise such as home decor, gift items and pet items. The company has also opened additional Sephora stores within its branches.
So far, these efforts are barely visible in the numbers. Kohl’s reported a first-quarter net loss of $27 million, or a loss of 24 cents per share, compared with a year-ago profit of $14 million, or 13 cents per share.
Net sales fell 5.3% year over year to $3.18 billion.
According to an LSEG analyst survey, Kohl’s performed as follows in the fiscal first quarter compared to Wall Street expectations:
- Loss per share: 24 cents versus an expected profit of 4 cents
- Revenue: $3.18 billion versus expected $3.34 billion
The company lowered its forecast for 2024 on Thursday. For the full year, net sales are now expected to decline between 2% and 4%. Wall Street analysts surveyed by LSEG had expected the 2024 revenue forecast to reflect a 0.2% increase.
According to LSEG, Kohl’s expects full-year diluted earnings per share in the range of $1.25 to $1.85, well below the expected $2.34.
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Kohl’s stock plunges on first-quarter results.
In addition to company-specific challenges, Kingsbury said the company has taken a more conservative stance in its full-year outlook due to higher interest rates and inflation.
“While our high-income customers’ spending has remained stable, our middle-income customers continue to be impacted,” he said in the release.
Despite the first-quarter results, he told CNBC that Kohl’s has made progress on newer initiatives. For example, he said the women’s category is showing positive trends and Sephora stores continue to be a bright spot.
At Sephora at Kohl’s, comparable sales, a metric that takes into account the impact of store openings and closings, rose 20% year-over-year during the quarter.
That’s far more than Kohl’s comparable sales, which fell 4.4% over the same period.
Kohl’s plans to open an additional 140 Sephora stores, most of them in the second quarter. In March, the company announced it would add similar Babies R Us brick-and-mortar locations in about 200 locations.
Other new categories are also doing well, Kingsbury said, with comparable sales for seasonal and everyday decor rising more than 30%. Some of these increases are due to the fact that Kohl’s previously did not carry many items in these categories. The range has been expanded to include, for example, more picture frames, wall art and decorative glassware such as vases.
“We will continue to work hard on these underserved categories,” Kingsbury said.
Inventory fell 13% from a year ago as Kohl’s cut costs and tried to gain more flexibility to respond quickly and buy on-trend merchandise. This was particularly the focus of the junior division, which is aimed at teenage girls. Kohl’s is moving this department next to Sephora to encourage shoppers to browse outfits.
“You have to be trendy at the right time,” Kingsbury said. “You certainly can’t be post-trend.”
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2024-05-30 20:10:12
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