Kohl’s cuts annual forecast, as it gets stung with inflation

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Kohl’s Corp. cut its earnings forecast, as the department store joins a string of retailers stung with soaring inflation

May 19, 2022, 6: 33 PM

5 min read

NEW YORK — Kohl’s Corp. cut its annual earnings and sales forecast, as the department store chain joins a string of retailers stung with soaring inflation. The reduction was announced on Thursday as Kohl’s Corp. reported fiscal first-quarter results below analysts’ expectations. As shoppers scrutinized their purchases, sales at stores that opened within the last year fell 5.2%.

Kohl, told The Associated Press by phone that she continues to forecast wage inflation and that the company is looking into ways to automate to offset the higher wages for its employees. Kohl’s now offers customers the option to place orders online without ever having to speak with an employee. It’s been a tough earnings season for many retailers. Target reported Wednesday that its profit tumbled 52% compared with the same period last year in an environment of rising costs for things like fuel, and also a lightening quick return by consumers to more normalized spending. On Tuesday, Walmart’s shares tumbled about 17% for similar reasons after it posted quarterly results.

” The year has started off below our expectations,” Gass said in a statement. After a strong quarter, with store sales up by low single figures, sales sank in April due to rising inflation and the government’s stimulus plan. On Thursday’s conference call,

Gass explained to analysts that the drop in sales was due to declines in children’s and home clothing. The store’s home business was a success in the early days after the pandemic, when shoppers stayed at home. But sales are declining as people go out more socially. She stated that Kohl’s is shifting to outdoor furniture, expanded decor and children’s beds. The unseasonably warm temperatures dragged down children’s clothing sales.

But Gass stated that high inflation is making shoppers reconsider their purchases. She noted that Kohl’s is still retaining its customers, but that the average total purchase price is falling.

“They’re coming into the store, and they’re being a bit more mindful of the brands they’re buying and what’s all going in their basket,” she said.

Gass is also experiencing a split in consumer preferences. Some are buying brands like Tommy Hilfiger and Calvin Klein, while others are choosing private-label brands. Kohl’s is raising the price of items such as children’s clothes, which are more price sensitive than other products. However, it is increasing the price of dressy clothing, which is less price sensitive.

Still, the company said that it remains committed to its long-term strategy and said that its Sephora stores at Kohl’s delivered sales gains across the 200 location for the quarter. Gass expects business will improve in the second half as it benefits from the rollout of 400 additional Sephora stores, improved loyalty rewards and further investment in its stores. Gass stated that Sephora shops have seen an increase in spending.

Gass stated that the company is currently reviewing multiple offers from interested parties to purchase the business.

The company’s board is working with Goldman Sachs to explore strategic alternatives, which to date has included engaging with 25 parties. Kohl’s stated that the board requested fully-financed final bids be submitted in coming weeks.

The Menomonee Falls, Wisconsin-based company said that it earned $14 million, or 11 cents per share.

The results were below Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of 75 cents per share.

The revenue for the department store operator was $3. 72 billion in the period, which also did not meet Street forecasts. Zacks surveyed three analysts and found that they expected $3. 85 billion. Sales fell from $3. 88 billion in the year-ago period.

Kohl expects full-year earnings between $6 and $6. 45 to $6. 85 per share, down from the previous $7 per share to $7. 50 per share. Analysts expected $7. 09 per share. The sales for the year are expected to increase by 1% compared to the previous year. The company previously stated that sales would increase by 2% to 3.3% for the year.

Shares increased nearly 4%, or $1. 56 to $44. 69 in afternoon trading.

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Elements of this story was generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on KSS at https://www.zacks.com/ap/KSS

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