Kohl's cuts outlook after tough Q2

Kohl’s Corp. cited the inflationary impact on consumer spending as negatively affecting its performance in the second quarter of fiscal 2022.

The department store retailer reported that its total revenue fell 8% to  $4.09 billion for the quarter ended July 30,  from $4.45 billion in the second quarter of fiscal 2021. Net income totaled $143 million, down 63% year-over-year from $382 million. Adjusted earnings per share (EPS) were $1.11, compared to $2.48 in the prior year period. Kohl’s CEO Michelle Gass referred to broader economic difficulties in her commentary on the quarter.

“Second quarter results were impacted by a weakening macro environment, high inflation and dampened consumer spending, which especially pressured our middle-income customers,” she said. “We have adjusted our plans, implementing actions to reduce inventory and lower expenses to account for a softer demand outlook. Kohl’s has navigated difficult periods in the past and I am confident in our ability to successfully manage through the current uncertainty.”

In one remedial step, on Aug. 18, 2022, Kohl’s entered into an accelerated share repurchase agreement, pursuant to a previously announced share repurchase program, to repurchase approximately $500 million of the company’s common stock. And as previously announced, on Aug. 9, 2022, Kohl’s board declared a quarterly cash dividend on theCompany’s common stock of $0.50 per share. 

“Our $500 million accelerated share repurchase underscores our steadfast confidence in Kohl’s future and focus on creating shareholder value,” said Gass. “We also remain firmly committed to our current dividend.”

Gass also remained optimistic in discussing Kohl’s future.

“We continue to execute on our transformation strategy and are pleased to deliver outsized performance in the nearly 600 stores which have been refreshed and elevated, featuring Sephora as a key cornerstone,” she said. “While 2022 has turned out to be more challenging than initially expected, Kohl’s remains a financially strong company with significant long-term growth potential.”

[Read more: Kohl’s adding 400 in-store Sephora shops this year]

The company is also updating its full-year fiscal 2022 financial outlook to include the following:

• Net sales is now expected to decline in the range of (5%) to (6%) as compared to the prior year.
• Operating margin is now expected to be in the range of 4.2% to 4.5%.
• Earnings per share is now expected to be in the range of $2.80 to $3.20, excluding any non-recurring charges.

C-level shakeup at Kohl’s
A number of C-level executives have left Kohl’s in recent months. In May 2022, Doug Howe left his position as Kohl’s chief merchandising officer to assume the role of president of DSW Designer Shoe Warehouse and executive VP of Designer Brands.

And in July 2022, the retailer said in a securities filing that its chief technology and supply chain officer, Paul Gaffney, would leave the company on Aug.1. Kohl’s said that its executive VP, technology and supply chain, Siobhan McFeeney, was promoted to CTO. The retailer recently named Christie Raymond, who had been serving as interim chief marketing officer, to that post permanently.

Headquartered in Menomonee Falls, Wis., Kohl’s operates more than 1,100 stores in 49 states, as well as the Kohls.com e-commerce site and the Kohl's app.