Kohl’s cut its full-year profit forecast after the department store operator missed Wall Street estimates for quarterly same-store sales and profit, sending its shares down over 10% Tuesday morning.
Much like other US retailers, Kohl’s has been bolstering its digital business to drive a turnaround as it fights to stay relevant at a time when shoppers increasingly prefer shopping online.
To get ahead of the game, Kohl’s has partnered up with Amazon and increased its focus on athletic apparel. Yet, Kohl’s missed same-store sales expectations in the reported quarter for the first time in two years.
“The year has started off slower than we’d like, with our first quarter sales coming in below our expectation,” chief executive officer Michelle Gass said.
Sales at stores open for at least a year fell 3.4%, the first drop in seven quarters, and were below the average analyst estimate of a 0.15% dip, according IBES data from Refinitiv.
Net sales fell to $3.82 billion in the first quarter ended May 4. Analysts on average were expecting $3.94 billion.
“We are planning the year more conservatively,” Kohl’s Gass said, adding that it was “actively addressing” the causes for weak first-quarter sales.
Net income fell 17% to $62 million, or 38 cents per share, from $75 million, or 45 cents per share, a year earlier.
Excluding certain items, the company earned 61 cents per share in the quarter, missing analysts’ expectation of 68 cents.
“There is no doubt that this (results) represents, at the very least, a serious diversion on Kohl’s road to recovery,” GlobalData Retail managing director Neil Saunders said.
The weak results also prompted the company to cut its adjusted profit forecast for fiscal 2019 to $5.15-$5.45 per share, compared to its prior outlook of $5.80-$6.15.
Analysts on average were expecting the company to earn profit of $6.04 per share.
The forecast for US consumer companies has come under the scanner recently due to the escalation of tariffs by Washington on Chinese imports.
Macy’s and JCPenney said on post-earnings conference calls that the companies could take a hit if the Trump administration implements 25% tariffs on about $300 billion of goods from China, including apparel and accessories. Kohl’s made no mention of the trade war with China in its statement.
Shares of Kohl’s were down 9.3% at $57.05.
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