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Kohl's Slashes 2022 Profit, Sales Guidance; "Considerable" Weakening in April

Published 19/05/2022, 13:16
Updated 19/05/2022, 13:16
© Reuters.

© Reuters.

By Geoffrey Smith 

Investing.com -- Kohl's Corp (NYSE:KSS) slashed its full-year forecasts for sales and profit growth on Thursday, warning of a "considerable" slowdown in business in April after a disappointing first quarter.

"The year has started out below our expectations," the department store chain said. "Following a strong start to the quarter...sales considerably weakened in April as we encountered macro headwinds related to lapping last year’s stimulus and an inflationary consumer environment."  

That weakening was reflected in a surge in inventories of $668 million in the quarter, a heavy drain on a balance sheet still strained by the secular struggles facing the department store sector. 

Comparable sales in the three months through April fell 5.2% on the year as a result, while adjusted earnings per share fell to only 11c, down from $1.05 a year earlier, and nowhere near a consensus forecast of 68c. 

The company said it now expects little or no growth in net sales this year, having earlier forecast growth of as much as 3%.

It also cut the midpoint of its forecast range for operating margin by 25 basis points and said adjusted earnings per share will be in a range of 20c on either side of $6.65. That's down some 12% from previous guidance of a range around $7.25 a share.

Kohl's stock fell another 6.8% by 8 AM ET (1200 GMT) in premarket trading, having already fallen 11% on Wednesday in response to similarly weak guidance from sectoral bellwethers Walmart (NYSE:WMT) and Target (NYSE:TGT). Both companies admitted that they expected inflation to eat into their profit margins this year, while also raising fears of a substantial slowdown in consumer spending, the engine of the U.S. economy. 

Kohl's hinted that the abrupt change in its outlook may be weakening its board's determination to stay independent, saying it "is thoroughly testing the Company’s standalone strategic plan against potential alternatives."

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