On Thursday, Kohl’s Corporation shares were down over 20 percent in pre-market trading after the mid-tier retailer missed estimates for the first quarter and then cut guidance for the year.

“Our first quarter results did not meet our expectations and are not reflective of the direction we are heading with our strategic initiatives,” offered company CEO Tom Kingsbury. “Regular price sales increased year-over-year, with early success in under-penetrated categories, positive trends in our Women’s business, and continued strong growth in Sephora. However, lower clearance sales versus last year represented a more than 600 basis point drag on comparable sales. Importantly, we were able to deliver gross margin expansion, manage inventory down 13 percent and tightly control expenses in the quarter.”

Net sales for the fiscal first quarter ended May 4 decreased 5.3 percent year-over-year to $3.2 billion with comparable sales down 4.4 percent for the period.

Gross margin as a percentage of net sales was 39.5 percent, an increase of 48 basis points.

SG&A expenses decreased 0.8 percent year-over-year to $1.2 billion. As a percentage of total revenue, SG&A expenses were 36.3 percent, an increase of 166 basis points year-over-year.

Operating income was $43 million compared to $98 million in the prior year. As a percentage of total revenue, operating income was 1.3 percent, a decrease of 148 basis points year-over-year.

Net loss was $27 million, or a loss of 24 cents per diluted share, compared to net income of $14 million, or 13 cents per diluted share, in the prior-year comparative quarter.

Inventory at quarter-end was $3.1 billion, a decrease of 13 percent year-over-year.

Operating cash flow was a use of $7 million as compared to a use of $202 million in the prior year.

Updated 2024 Financial and Capital Allocation Outlook
For the full year 2024, which has 52 weeks compared to 53 weeks in the full year 2023, the company’s guidance includes the potential impact of credit card late fee regulatory changes in the second half of 2024. The company currently expects the following:

  • Net Sales: A decrease of 2 percent to 4 percent
  • Comparable Sales: A decrease of 1 percent to 3 percent
  • Operating Margin: In the range of 3.0 percent to 3.5 percent of net sales
  • Diluted EPS: In the range of $1.25 to $1.85 per share
  • Capital Expenditures: Approximately $500 million, including expansion of the Sephora partnership and other store-related investments
  • Dividend: On May 15, 2024, Kohl’s Board of Directors declared a quarterly cash dividend on the company’s common stock of 50 cents per share. The dividend is payable June 26, 2024 to shareholders of record at the close of business on June 12, 2024.
  • Debt Reduction: Earlier this month, Kohl’s reported it exercised its right to redeem the remaining $113 million of its 9.500 percent notes due May 15, 2025. The redemption will be completed on June 13, 2024.

Image courtesy Kohl’s