Kohl’s (KSS) reports results for Q1 2022

Customers exit a Kohl’s store November 12, 2015 in San Rafael, California.

Justin Sullivan | News from Getty Images | Getty Images

Kohl’s said Thursday that definitive and fully funded offers are expected from potential buyers in the coming weeks as the retailer faces increased selling pressure from activists.

Chief Executive Officer Michelle Gass said Kohl’s “is pleased with the number of parties recognizing the value of our business and our plan.”

The retailer’s stock ended the day up 4.4% at $45.04, even as the company posted a massive profit slump in its fiscal first quarter and cut its earnings and sales guidance for the year. Gass said in a press release that 2022 started below her expectations.

Homeware and children’s goods were the biggest underperformers, while menswear was a bright spot. Customers also bought fewer items per trip on average, a sign that some people are holding back on non-essential purchases.

“Selling weakened significantly in April as we encountered macro headwinds related to last year’s stimulus overlap and an inflationary consumer environment,” Gass said. But, she noted, as the weather warmed up in May, more people headed to the stores to stock up on new spring clothes and accessories.

Kohl’s joins a growing list of major retailers, including Walmart and Target, that have seen logistics and labor costs eat away at profits amid 40 years of high inflation. These companies have also begun to see American consumers adjust their spending patterns as they face higher prices for everything from milk to workout clothes. Kohl’s said Thursday it doesn’t expect inflation to ease anytime soon.

Kohl’s now expects fiscal 2022 adjusted earnings per share to be in the range of $6.45 to $6.85, compared to its previous guidance of $7.00 to $7.50.

Net sales are forecast to grow flat to 1% year-on-year compared to the previous guidance of 2% to 3%.

Here’s how Kohl’s performed in the three months ended April 30, compared to what Wall Street was expecting, according to a poll of analysts by Refinitiv:

  • Earnings per share: 11 cents vs. 70 cents expected
  • Revenue: $3.72 billion versus $3.68 billion expected

Kohl’s reported net income of $14 million, or 11 cents a share, for the fiscal first quarter, compared to $14 million, or 9 cents a share, a year ago. That fell short of analysts’ expectations for 70 cents a share.

Revenue fell to $3.72 billion from $3.89 billion a year earlier, but still beat analyst estimates for revenue of $3.68 billion.

According to Kohl, comparable sales fell by 5.2%. Analysts had expected an increase of 0.5%.

Kohl’s dismal results come amid the retailer’s highly watched sales process. Kohl’s has been under pressure to find a new owner since activist hedge fund Macellum Advisors pressed the company in January, arguing that Gass hadn’t done enough to boost sales.

Macellum also pushed to overhaul Kohl’s board, but it was unsuccessful. Last week, Kohl’s shareholders voted to re-elect the company’s current 13 board members, beating Macellum’s proposal. Still, the activist group responded that they would hold Kohls accountable for his decisions in the coming months.

Gass, who assumed the CEO role at Kohl’s in May 2018, has tried a number of strategies to lure shoppers into stores, including signing a partnership with Amazon and adding Sephora beauty shops to hundreds of Kohl’s stores. locations. The company has also invested heavily in its activewear business as more consumers prefer comfortable clothing over dresses and blazers.

But there is increasing skepticism as to whether Gass’ plans will work out.

“Walking into a Kohl’s store is an unexciting experience, which is why some customers stop visiting and why others buy less when they visit,” said Neil Saunders, managing director of GlobalData Retail.

Kohl’s said in a securities filing Wednesday night that its chief merchandising officer and chief marketing officer will be leaving the retailer. A search for successors is already underway, said a spokeswoman.

Ron Murray, a longtime merchandising executive, will serve as interim chief merchandising officer, the company said. Christie Raymond, vice president of customer engagement, media and analytics, will become interim chief marketing officer.

Kohl’s shares are down about 9% so far this year, including Thursday’s gains.

https://www.cnbc.com/2022/05/19/kohls-kss-reports-q1-2022-earnings.html Kohl’s (KSS) reports results for Q1 2022

Gary B. Graves

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