A Surprising Loss For Kohl's In The Holiday Quarter Was Followed By A Weak Sales Outlook

On Wednesday, Kohl's reported a significant, unexpected loss and a sales fall of nearly 7% for the holiday season.

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However, the corporation provided a gloomy prediction for the coming year. It stated that it expected net sales to fall between 2% and 4%, taking into account the impact of the 53rd week of the year, which is worth around 1% more than the previous year. It stated that, excluding one-time expenses, it anticipates diluted earnings per share to range from $2.10 to $2.70.

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Using data from a Refinitiv survey of analysts, the following chart compares Kohl's performance for the quarter that ended January 28 to what Wall Street had predicted:

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The company lost $2.49 per share compared with the expected earnings of 98 cents

$5.78 billion vs $5.99 billion in revenue.

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The company's net income dropped significantly in the fourth quarter from an income of $299 million, or $2.20 per share, to a loss of $273 million, or a loss of $2.49 per share.

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In the quarter, same-store sales decreased by 6.6%.

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Not Benefiting From Pandemic Gains

When consumers spend more on food, housing, and other needs, retailers like Kohl's aren't the only ones experiencing a decline in business. Inflationary pressures have also been mentioned by Walmart, Target, and Macy's. But, Kohl's has been left out of the huge sales growth that the Covid pandemic's early years brought, when people were primarily spent their extra money from stimulus cheques on goods rather than services.

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An survey by the research firm GlobalData shows that overall retail spending has increased by 28.4% compared to 2019. Spending at Kohl's decreased by 15.4% over those same three years, while the company's earnings fell by 203%.

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As Kohl's performance declined, activist investors started to target the company. It has recently battled with leadership changes as well as a more difficult economic environment.

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In November, the company's former CEO Michelle Gass made the announcement that she was quitting to take a position as president and CEO-in-training at Levi Strauss & Co. Her resignation followed criticism of Kohl's turnaround strategy by Ancora Holdings and Macellum Advisors, calls for an improvement in the company's sales trends, and a need for new management.

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Once Kohl's concluded negotiations this summer to sell to the Franchise Group, owner of The Vitamin Shoppe, pressure from those investors increased.

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Kingsbury, who served as the temporary CEO, was named the permanent CEO by Kohl's last month. He served as Burlington Stores' former CEO.

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As it appointed Kingsbury to the position, it stated that a collaboration arrangement had been formed with Macellum Advisors.

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The retailer had declined to offer a holiday quarter outlook and withdrawn its full-year prediction in November, citing the impact of inflation on consumer spending and the difficulty in predicting future sales patterns.

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As consumers bought fewer of the categories like home goods and activewear that had been hot during the pandemic, Kohl's, like other retailers, has battled with an excess of unsold inventory. Companies have been forced to use more markdowns as a result.

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As of the conclusion of the fourth quarter, Kohl's inventory was still high and was up 4% from the previous year, according to the business.

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In terms of performance this year, Kohl's has gained about 11%, outperforming the S&P 500's 3% gain. Nearly $3.1 billion is the market value of the company's shares as they closed at $28.04.