Normally, I wouldn’t dedicate space to Kohl’s earnings, but considering this week’s retail wipeout and the macro implications, the company’s quarterly results (which one industry analyst described as “pretty poor”) were worth a mention.
Kohl’s is, of course, still exploring strategic options, but that’s not really the point. The point, rather, is that comps fell more than 5% in Q1 against estimates for a 1% gain, and profit came in at just 11 cents per share, nowhere close to consensus, which expected six times that.
“Following a strong start to the quarter with positive low-single digits comps through late March, sales considerably weakened in April as we encountered macro headwinds related to lapping last year’s stimulus and an inflationary consumer environment,” CEO Michelle Gass remarked.
Here again, I’m compelled to suggest the most relevant macro commentary these days comes from retail executives, who are on the front lines as consumer preferences shift, inflation bites and compensation costs pile up.
Read more:
As for Kohl’s specifically, it’s fair to say soaring prices for gas and food are siphoning demand for discounted name brands.
The company’s gross margin shrank 69bps, but a double-digit jump in SG&A looked material. Operating expenses as a percentage of sales were 470bps higher YoY. For the full-year, Kohl’s now sees operating margins in the range of 7% to 7.2%, lower than its previous forecast.
The chain also slashed its profit outlook. EPS for the full-year will be between $6.45 and $6.85, markedly lower than the $7 to $7.50 the company saw previously, and well below the Street (around $7.00).
Apparently, the guidedown represented an adjustment for Q1’s poor showing, so it wasn’t necessarily a dour comment on the future. But at a time when the likes of Walmart and Target are unable to deliver, and considering the notoriously challenging operating environment retailers like Kohl’s are attempting to navigate, it’s not a stretch to suggest things could deteriorate further if the consumer comes under more strain.
Earlier this month, Kohl’s managed to beat back Macellum Capital’s efforts to shake up the boardroom, but that just increased scrutiny on the firm’s performance, and particularly the top line. On Thursday, Kohl’s cut its revenue guidance. Sales will be flat this year, or grow 1% at best.
The firm said it invited “multiple bidders” to sort through a half-million pages of documents and meet with management. It’s received “preliminary, non-binding proposals” and said the board has “requested fully-financed final bids to be submitted in the coming weeks.”
On Wednesday afternoon (so, just hours ahead of Thursday morning’s results), Kohl’s said Doug Howe, chief merchandising officer, and Greg Revelle, chief marketing officer, were leaving the company. Revelle’s exit (originally announced on May 12) is effective at the beginning of next month. Howe is leaving “immediately.”
