Kohl’s swings to loss, cuts forecast; maintains ‘high conviction’ in strategy
Kohl’s Corp. reported a disappointing first quarter with both top- and bottom-line declines amid efforts to improve its merchandise offerings.
The department store retailer reported a net loss of $27 million, or $0.24 per share, for the quarter ended May 4, compared to a profit of $14 million, or $0.13 cents per share, in the year-ago period. Analysts were expecting a profit of $0.05 per share. Operating income fell to $43 million from $98 million in the year-ago period.
Revenue fell 5.3% to $3.2 billion, missing analysts’ estimate of $3.4 billion. Same-store sales were down 4.4%.
“Our first quarter results did not meet our expectations and are not reflective of the direction we are heading with our strategic initiatives,” said Tom Kingsbury, who took the reins as Kohl’s CEO in February 2023. “Regular price sales increased year-over-year, with early success in under-penetrated categories, positive trends in our women’s business, and continued strong growth in Sephora."
Kohl’s has been working to improve and update its assortments. In March, it announced an expansion of its home assortment by 40% to offer “newness” in select categories that include wall art, glassware, ceramic home decor, barware, botanicals, lighting and more.
Also in March, Kohl’s entered into a partnership with WHP Global, owner of Toys'R'Us and Babies'R'Us, to open Babies”R”Us in-store shops in 200 Kohl's stores, starting this fall. The retailer also continues to open in-store Sephora shops.
“We continue to have high conviction in our strategy and believe that our key growth initiatives, including Sephora, home decor, gifting, impulse, and our upcoming partnership with Babies “R” Us, will contribute more meaningfully going forward,” Kingsbury said. “That said, we recognize we have more work to do in areas of our business.”
Kohl’s said its gross margins grew by about 0.5% as its inventory fell 13% and it “tightly” controlled expenses during the quarter.
Looking ahead, Kingsbury said the company was approaching its financial outlook for the year more conservatively “given the first quarter underperformance and the ongoing uncertainty in the consumer environment.”
The retailer lowered its full year 2024 outlook. It expects full-year earnings per share in the range of $1.25 to $1.85, compared to the previous forecast of $2.10 to $2.70.
Net sales are expected to decline between 2% and 4%, compared to the chain’s earlier expectation of a decrease of 1% to an increase of 1%. Comparable sales are now expected to decline 1% to 3%, compared to an earlier forecast that called for sales to range from flat to 2%.
Kohl’s has more than 1,100 stores in 49 states.