Kohl’s reported earnings in the first quarter came in well below Wall Street’s targets as same-store sales fell 5.2 percent. The retailer significantly lowered its guidance for the year.
In the quarter ended April 30, sales fell 4.4 percent to $3.72 billion from $3.9 billion. Wall Street’s consensus estimate had been $3.68 billion. The same-store decline of 5.2 percent compared with a gain of 69.5 percent a year ago.
Gross margins eroded 69 basis points to 38.3 percent from 39.0 percent. Selling, general and administrative expenses grew 10.5 percent to $1.29 billion from $1.17 billion.
On a reported basis, net income was flat at $14 million, or 11 cents a share, against $14 million, or 9 cents, a year ago.
On an adjusted basis, earnings fell 92 percent to $14 million, or 11 cents, from $165 million, or $1.05, a year ago. Wall Street’s consensus estimate had been 70 cents.
“The year has started below our expectations. 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. We remain committed to our long-term strategy and are encouraged that our updated store experience with Sephora at Kohl’s shops delivered positive comparable store sales across these 200 locations for the quarter. We continue to expect our business to improve as the year progresses, with growth in the second half as we benefit from the rollout of 400 additional Sephora stores, enhanced loyalty rewards and further investment in our stores,” said Michelle Gass, Kohl’s chief executive officer.
“Regarding our review of strategic alternatives, we continue to engage with multiple interested parties. We have formally communicated the specific procedures for submitting actionable bids due in the coming weeks. We continue with our detailed diligence phase and are pleased with the number of parties who recognize the value of our business and plan,” said Gass.
Updated 2022 Financial Outlook
The company is updating its full-year 2022 financial outlook to include the following:
- Net sales are now expected to be in the range of 0 percent to 1 percent as compared to the prior year;
- Operating margin is now expected to be in the range of 7.0 percent to 7.2 percent;
- Earnings per share are now expected to be in the range of $6.45 to $6.85, excluding any non-recurring charges.
Previously, Kohl’s expected net sales to increase 2 percent to 3 percent as compared to the prior year, operating margin to be in the range of 7.2 percent to 7.5 percent, and earnings per share to be in the range of $7.00 to $7.50, excluding any non-recurring charges.
The Kohl’s Board thoroughly tests the company’s standalone strategic plan against potential alternatives and has designated its Finance Committee to lead the ongoing review of expressions of interest. The Board engaged Goldman Sachs to conduct a comprehensive process to explore strategic alternatives, which has included engagement with over 25 parties. Multiple bidders were invited to a data room containing over 550,000 pages across over 55,000 documents and meetings with management. While preliminary, non-binding proposals have been received, further diligence is ongoing, and the Board has requested fully-financed final bids to be submitted in the coming weeks.
Photo courtesy Kohl’s