Kohl’s Cuts Annual Forecasts Amid Weaker Consumer Demand

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Kohl's reduced its yearly sales and profit estimates after reporting a surprising quarterly loss on Thursday.
Kohl's reduced its yearly sales and profit estimates after reporting a surprising quarterly loss on Thursday.

Department store chain Kohl’s cut its annual sales and profit forecasts after posting a surprise quarterly loss on Thursday. Weaker consumer demand for its apparel and footwear dragged its shares down as much as 26% in early trading.

American shoppers still prioritize essential purchases over discretionary products like apparel, electronics, and home goods as they face dwindling pandemic-era savings and higher interest rates.

Economic Pressures on Middle-Income Shoppers:

Chief Executive Officer Tom Kingsbury said on a post-earnings call that Kohl’s middle-income customers’ discretionary spending continues to be pressured by a number of economic factors, including high interest rates and inflation, while it has remained steady among high-income customers.

The department store chain’s dismal quarterly report contrasts with some of the other retailers, including Abercrombie, which reported strong first-quarter sales owing to its more on-trend merchandise.

Reliance on External Brands:

“Kohl’s has been too reliant on other brands such as Sephora, Amazon, and now Babies R Us to drive traffic rather than distinguishing its core brand identity,” Emarketer senior analyst Zak Stambor said.

He added that shoppers are willing to spend if they see value in an on-trend, well-made dress from Abercrombie or a healthy salad from Sweetgreen.

Impact of Lower Clearance Sales:

Kohl’s also said that lower clearance sales than last year resulted in a more than 600-basis-point drag on comparable sales that decreased 4.4% in the first quarter.

The company forecasts fiscal 2024 net sales to fall between 2% and 4%, compared with its previous expectation of a 1% drop and a 1% rise. It also expects annual earnings per share in the range of $1.25 to $1.85, compared with its previous forecast of $2.10 to $2.70.

First Quarter Financial Results:

According to LSEG data, the company reported a per-share loss of 24 cents in the first quarter, while analysts predicted a profit of 4 cents per share.

Kohl’s was trading at $20.38 and was on track for its worst day ever, while its peers Macy’s and Nordstrom Inc, reporting later today, were down about 3% each.

James Adam

James Adam, a noted business writer for CEO Times Magazine, specializes in insightful industry analysis and executive profiles. Known for his clear, concise style, James offers readers an expert perspective on global business trends and market dynamics.

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