Shoppers walk outside a Kohl’s store in Mount Kisco, New York.
Scott Mullin CNBC
Coles Shares plunged more than 20% on Thursday after the company reported an unexpected per-share loss, well below Wall Street’s slim profit expectations.
The drop in stock prices is expected to mark the company’s largest one-day drop in stock prices to date.
Chief Executive Officer Tom Kingsbury blamed the sales decline on a tough comparative environment in an interview with CNBC. He said the company’s efforts to streamline inventory and accelerate turnaround plans led to higher than normal clearance sales in the year-ago period.
He added that sales started the quarter strong in January and February, but then dipped in the final five weeks of the quarter as bad weather discouraged customers from buying seasonal items such as spring clothing. “Fortunately, we expect sales to recover as the weather improves,” he said.
For investors, Kohl’s underperformance has raised questions about the company’s turnaround strategy, led by Kingsbury, the former head of the off-price chain. Burlington StoreKohl’s has tried to attract shoppers by adding new products such as home décor, gift items and pet supplies, and it has also opened more Sephora locations within its stores.
So far, those efforts haven’t shown up in the numbers: Kohl’s reported a first-quarter net loss of $27 million, or 24 cents a share, down from a profit of $14 million, or 13 cents a share, a year earlier.
Net sales fell 5.3% year over year to $3.18 billion.
According to an analyst survey by LSEG, Kohl’s first-quarter results compared with Wall Street expectations as follows:
Loss per share: 24 cents (expected profit of 4 cents) Revenue: $3.18 billion (expected profit of $3.34 billion)
The company on Thursday lowered its 2024 outlook. It now expects full-year net sales to fall 2% to 4%. Wall Street analysts surveyed by LSEG had expected 2024 sales to rise 0.2%.
LSEG said Coles now expects full-year diluted earnings per share in the range of $1.25 to $1.85, well below its forecast of $2.34 per share.
Kohl’s shares fell sharply following its first-quarter results.
Kingsbury said the company’s unique challenges, plus rising interest rates and inflation, led it to be more conservative with its full-year outlook.
“While spending among higher-income customers has stabilized, middle-income customers continue to be affected,” he said in a statement.
He told CNBC that despite the first-quarter results, Kohl’s is making progress on new initiatives, including that its women’s categories are showing positive trends and that its Sephora stores continue to perform well.
Sephora’s same-store sales at Kohl’s, a measure that excludes the impact of store openings and closings, increased 20% year over year during the quarter.
This far outpaces Kohl’s same-store sales, which fell 4.4% during the same period.
Kohl’s plans to open 140 additional Sephora stores in the second quarter. The company said in March it was adding about 200 Babies-A-Las stores.
Other new categories are also doing well, with same-store sales of seasonal and everyday decor up more than 30%, Kingsbury said. Some of that growth comes because Kohl’s has historically not carried many products in those categories, as it expands its assortment by adding more picture frames, wall art and decorative glass items like vases.
“We remain committed to these underpenetrated categories,” Kingsbury said.
Inventory is down 13% year over year. Kohl’s has tried to cut costs and be more flexible in buying trendy merchandise. The company has especially focused on its juniors department, which targets teenage girls. Kohl’s is moving that department next to Sephora so shoppers can browse the clothes, too.
“You have to be on trend at the right time,” Kingsbury says, “and definitely not ahead of the trend.”
