Shoppers walk past a Kohl's store in Mount Kisco, New York.
Scott Milin | CNBC
Cole Shares fell more than 20% on Thursday after the company reported a surprise loss per share, falling well short of Wall Street expectations for a slight profit.
This stock decline puts the stock on track for its biggest single-day decline ever.
In an interview with CNBC, CEO Tom Kingsbury attributed the slow sales to difficult comparisons. The department store had higher-than-usual liquidation levels in the same period last year, he said, as it tried to clean out inventory and begin its turnaround plan.
He added that sales trends started the quarter strong in January and February, but declined in the last five weeks of this period as customers were reluctant to purchase seasonal goods such as clothing for the spring due to bad weather conditions. “Fortunately, we see it coming back as the weather improves,” he said.
For investors, Kohl's weak results have raised questions about the company's turnaround strategy. Led by Kingsbury, former leader of the Off-Price series Burlington storesKohl's has tried to attract shoppers by adding new merchandise such as home decor, gift products and pet goods. It also opened more Sephora stores within its stores.
So far, these efforts have not shown much in terms of numbers. Kohl's reported a net loss of $27 million, or a loss of 24 cents per share, during the first quarter compared to last year's profit of $14 million, or 13 cents per share.
Net sales decreased 5.3% to $3.18 billion compared to the previous year.
Here's what Kohl's did in its fiscal first quarter compared to what Wall Street expected, according to a survey of analysts by LSEG:
Loss per share: 24 cents vs. 4 cents expected Revenue: $3.18 billion vs. $3.34 billion expected
The company on Thursday lowered its guidance for 2024. It now expects full-year net sales to decline between 2% and 4%. Wall Street analysts polled by LSEG had expected 2024 sales guidance to reflect a gain of 0.2%.
Kohl's expects full-year diluted earnings per share to be in the range of $1.25 to $1.85, well below expected earnings per share of $2.34, according to LSEG.
Kohl's stock fell after its first-quarter results.
On top of the company's own challenges, Kingsbury said the company has taken a more conservative stance on its full-year outlook due to rising interest rates and inflation.
“While spending among our high-income customers has remained flat, our middle-income customers continue to be impacted,” he said in the statement.
Despite the first-quarter results, he told CNBC that Kohl's has made progress on newer initiatives. For example, he said the women's category showed positive trends and Sephora's in-store stores remained a bright spot.
For Sephora at Kohl's, comparable sales, a measure that excludes the impact of store openings and closings, rose 20% year over year during the quarter.
This is significantly higher than Kohl's comparable sales, which fell 4.4% over the same period.
Kohl's plans to open 140 more Sephora stores, most of which will open in the second quarter. It announced in March that it would add similar in-store Babies R Us locations to about 200 locations.
Other new categories are also performing well, with comparable sales for seasonal and everyday decor up more than 30%, Kingsbury said. Some of those gains are because Kohl's hasn't carried many items in those categories before. She has expanded her selections, such as offering more picture frames, wall art, and decorative glassware, such as vases.
“We will continue to work hard on these under-penetrated categories,” Kingsbury said.
Inventory fell 13% year over year as Kohl's tightened expenses and tried to give itself more flexibility to respond quickly and buy merchandise that keeps up with the trend. I focused on this in particular in the junior section, which caters to teenage girls. Kohl's is moving this section next to Sephora to encourage shoppers to browse clothes as well.
“You have to be in the trend at the right time,” Kingsbury said. “You can't spread a trend for sure.”
