US Markets
Thursday, May 30th, 2024 4:25 pm EDT
Key Points
- Kohl’s shares fell by 25% after reporting a surprising first-quarter loss of 24 cents per share, significantly missing Wall Street’s expectation of a 4 cents profit, marking the stock’s biggest single-day percentage decline ever.
- CEO Tom Kingsbury attributed the slower sales to high clearance levels from the previous year and poor weather affecting seasonal merchandise sales. The company’s turnaround efforts, including adding new product categories and Sephora shops, have not yet yielded significant results, with net sales decreasing by 5.3% year-over-year.
- The company lowered its 2024 guidance, now expecting a net sales decline of 2% to 4% and full-year diluted earnings per share between $1.25 and $1.85, much lower than the expected $2.34 per share. Despite these challenges, Kohl’s reported positive trends in its women’s category and a 20% increase in Sephora shop sales.
Kohl’s shares dropped by 25% on Thursday following an unexpected loss per share, significantly missing Wall Street’s expectation for a slight profit. This decline represents the stock’s largest single-day percentage fall in history. CEO Tom Kingsbury attributed the slower sales to challenging comparisons, noting that the previous year’s higher-than-usual clearance levels had temporarily boosted sales. Sales trends were initially strong in January and February but weakened in the last five weeks of the period as poor weather deterred customers from purchasing seasonal items like spring clothing. However, Kingsbury is optimistic that sales will recover as the weather improves.
Kohl’s weak financial results have cast doubt on the effectiveness of its turnaround strategy under Kingsbury, who previously led Burlington Stores. The strategy has included diversifying its product offerings to include home decor, gifts, and pet goods, as well as increasing the number of Sephora shops within Kohl’s stores. Despite these efforts, the results have been underwhelming. The company reported a net loss of $27 million, or 24 cents per share, for the first quarter, compared to a profit of $14 million, or 13 cents per share, the previous year. Net sales also decreased by 5.3% to $3.18 billion.
In its fiscal first quarter, Kohl’s significantly underperformed relative to Wall Street expectations. Analysts had anticipated a profit of 4 cents per share, but the company reported a loss of 24 cents per share. Revenue was also lower than expected, at $3.18 billion versus the anticipated $3.34 billion. Consequently, Kohl’s has revised its 2024 guidance, now projecting full-year net sales to decline between 2% and 4%, a stark contrast to the slight gain analysts had expected. The company also lowered its full-year diluted earnings per share forecast to a range of $1.25 to $1.85, well below the $2.34 per share anticipated by analysts.
Kingsbury noted that the company has adopted a more conservative full-year outlook due to higher interest rates and inflation. He pointed out that while spending among high-income customers remained steady, middle-income customers have been significantly affected. Despite the disappointing first-quarter results, Kingsbury highlighted progress in newer initiatives, such as positive trends in the women’s category and the continued success of Sephora shops within Kohl’s, where comparable sales rose 20% year over year.
Kohl’s plans to expand these initiatives by opening another 140 Sephora shops in the second quarter and introducing Babies R Us in-store outposts in about 200 locations. Other new categories, like seasonal and everyday decor, are also performing well, with comparable sales up more than 30%. This success is partly due to Kohl’s expanding its product selection in these areas, offering more items like picture frames, wall art, and decorative glassware.
The company’s inventory was down 13% year over year as it tightened expenses and sought greater flexibility to respond quickly to trends. Kohl’s has particularly focused on its juniors department, which caters to teen girls, and plans to position it next to Sephora to encourage outfit browsing. Kingsbury emphasized the importance of timely trends, stating, “You have to be in the trend at the right time. You can’t be post trend, for sure.”
Overall, while Kohl’s faces significant challenges, including disappointing first-quarter results and a conservative outlook, the company is making strategic efforts to revitalize its product offerings and improve customer engagement, which may bear fruit in the long term.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/05/30/kohls-kss-earnings-q1-2024.html
