Kohl’s Corporation (NYSE:KSS) experienced its worst day on record Thursday, as shares plummeted up to 26% following a surprise quarterly loss and a downgrade of its annual sales and profit forecasts. The loss was attributed to weaker consumer demand for its apparel and footwear.
The shift in consumer behavior, with American shoppers prioritizing essential purchases over discretionary items like apparel, electronics, and home goods, has impacted Kohl’s. Shoppers are contending with reduced pandemic-era savings and higher interest rates, explained CEO Tom Kingsbury during a post-earnings call. He noted that while discretionary spending remains steady among high-income customers, middle-income customers are significantly pressured by economic factors including inflation and high interest rates.
In contrast to Kohl’s disappointing report, other retailers like Abercrombie & Fitch Co. (NYSE:ANF) have reported strong first-quarter sales due to their more trendy merchandise.
“Kohl’s has overly depended on other brands such as Sephora, Amazon (NASDAQ:AMZN), and now Babies R Us to attract customers, rather than defining its own core brand identity,” commented Zak Stambor, senior analyst at eMarketer. He added that consumers are willing to spend on on-trend, well-made items, citing examples like Abercrombie’s dresses or Sweetgreen’s (NYSE:SG) healthy salads.
Additionally, Kohl’s noted that a reduction in clearance sales compared to the previous year resulted in a significant 600-basis-point drag on comparable sales, which fell by 4.4% in the first quarter.
Kohl’s revised its fiscal 2024 net sales forecast to a decline of between 2% and 4%, down from the previous expectation of a 1% drop to a 1% increase. The company also adjusted its annual earnings per share forecast to a range of $1.25 to $1.85, from the earlier forecast of $2.10 to $2.70.
For the first quarter, Kohl’s reported a loss of 24 cents per share, while analysts had anticipated a profit of 4 cents per share, according to LSEG data.
As a result, Kohl’s shares were trading at $20.38, marking a historic low. Meanwhile, peers Macy’s Inc. (NYSE:M) and Nordstrom Inc. (NYSE:JWN), which is set to report later today, saw their shares decline by about 3% each.
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