Kohl’s posts a surprising quarterly loss, and projects a weak sales forecast

kohl Wednesday posted a surprisingly large loss and a drop in sales of about 7% in the quarter.

Its latest results come as the retailer deals with years of delayed sales, which has caught the attention of activist investors and contributed to a recent leadership shake-up.

Kohl’s also sees more lackluster sales ahead. She shares a subdued look for this year. She said she expects net sales to range between a decline of 2% and a decline of 4%, including an impact in the 53rd week of the year of about 1% year-over-year. It said it expects diluted earnings per share to be in the range of $2.10 to $2.70, excluding one-time fees.

Shares closed Wednesday at $27.51, down nearly 2%.

Here’s how Kohl’s performed for the quarter that ended January 3rd. 28 compared to what Wall Street would have expected, based on a survey of analysts by Refinitiv:

• Loss per share: $2.49 vs. Expected earnings of 98 cents per share
• Revenue: $5.78 billion vs. $5.99 billion

In the fourth quarter, the company’s net income swung significantly to a loss of $273 million, or a loss of $2.49 per share, from net income of $299 million, or $2.20 per share.

Same-store sales fell 6.6% in the first quarter.

Kohl’s new CEO Tom Kingsbury attributed the retailer’s disappointing holiday results to inflation. On an investor call, he described Kohl’s expansion of Sephora locations in its stores as one of its successes. It plans to open beauty shops in all of its 1,000-plus stores.

But he acknowledged that Coles “lost some of his gains in other major categories,” he said. “Honestly, I know we can do better.”

Store sales patterns improved as the fourth quarter continued, as more Sephora stores opened in stores and Kohl’s offered more items on post-holiday clearance.

Digital sales were down 12% year-over-year and accounted for 37% of all sales.

Kingsbury asked for patience, as the retailer tries to turn its sales around while catering to middle-income consumers who are becoming more cautious about spending.

“The full impact of our efforts will take time. It will not happen overnight,” he said. “And we must recognize that we are implementing these changes against a difficult macroeconomic background.”

Kingsbury began putting together his new leadership team. Earlier this week, Kohl’s announced the appointment of Dave Alves, a 30-year retail veteran, as its new Chief Operating Officer. He will take over the position in April. Last month, I named Nick Jones as Chief Marketing Officer and Chief Digital Officer. Jones, who will start this month, has worked with well-known British retail names, including department store Marks & Spencer and fashion brand George.

He said Coles wants to expand its womenswear business, increase home decor sales and “become a destination for gifts.”

Sales of Kohl’s brands, which tend to be lower priced, were roughly flat quarter over year, CFO Jill Timm said on an investor call. National brand sales fell by high single digits due to weak sales of active apparel, home goods, and denim.

Accessories, a category that includes cosmetics, handbags and luggage, was its strongest business, growing at mid-single-digit percentage year-over-year.

Men’s and women’s apparel outperformed the company’s average. The home, shoe, and children’s departments performed below the company’s average.

Kohl’s isn’t the only retailer that has felt the slump as consumers spend more on food, housing and other necessities. WalmartAnd license plate And Messi They also cited inflationary pressures. However, Kohl’s lost out on the big sales gains made in the early years of the Covid pandemic, a time when consumers were getting extra dollars from stimulus checks and were spending largely on goods rather than services.

Overall retail spending grew 28.4% compared to 2019, according to an analysis by research firm GlobalData. During the same three-year period, spending at Kohl’s fell 15.4% and profits at the company fell 203%.

Even Kohl’s performance is late, he’s become a target for activist investors. Leadership has changed recently, too.

Then-CEO Michelle Gass announced in November that she was leaving to become President and CEO-in-training at Levi Strauss & Co. Her departure came after Ancora Holdings and Macellum Advisors questioned Kohl’s turnaround strategy, pushed to improve its sales trends and called for new leadership.

Pressure from those investors gained momentum after Kohl’s ended talks over the summer to sell it to Franchise Group, owner of The Vitamin Shoppe.

Cole announced last month that Kingsbury, who served as interim CEO, would take over the position permanently. He is the former CEO of the company Burlington Stores. It said at the time it had reached a collaboration agreement with Macellum Advisors, hiring Kingsbury for the role.

The retailer declined to provide a quarterly forecast for the holidays and withdrew its guidance for the full year in November, saying inflation had hurt consumer spending and made it difficult to predict future sales patterns.

Along with other retailers, Kohl’s has also struggled with an abundance of unsold inventory as shoppers bought less than categories like home goods and active apparel that were popular during the pandemic. This forced companies to resort to more write-downs.

Kohl’s stock remains elevated, the company said, up 4% year-over-year as of the end of the fourth quarter.

As of Tuesday’s close, Kohl’s stock is up about 11% this year, outpacing its nearly 3% gain for the S&P 500. Its shares closed at $28.04, pushing the company’s market value to nearly $3.1 billion.