Kohl’s Falls After Further Drop in Inflation Pressure Forecast, Sephora to Expand Kohl’s Stores

Shares of Kohl’s Corp. fell after the company cut its full-year profit and sales forecast for the second consecutive quarter as inflation suppressed demand and costs continued to rise.

The department store chain now expects earnings per share, excluding certain items, in the range of $2.80 to $3.20. Kohl’s had already cut its forecast in May, telling investors to expect $6.45 to $6.85.

Net sales for the year are expected to fall 5% to 6%, Kohl’s said in a statement Thursday, down from an already lowered outlook of flat 1% this year.

Kohl’s is struggling as inflation drives up costs and puts pressure on consumer budgets, although sales growth has been hard to come by even before the macroeconomic environment deteriorates. On Thursday, the retailer said middle-income shoppers had become more price-conscious, with some spending less per transaction, making fewer trips and turning to value brands.

“We have adjusted our plans, implementing actions to reduce inventory and reduce expenses to account for the weaker demand outlook,” chief executive Michelle Gass said in a statement.

Kohl’s shares fell 10% in New York trading. The title had already fallen by 31% this year until Wednesday.

Inventory in the quarter ended July 30 was up 48% from a year ago due to lower sales and other factors, including investments to support the opening of 400 Sephora stores across Kohl sites in 2022. The retailer has relied on the LVMH-owned beauty company to drive sales and attract new customers. Excluding additional items, inventories increased by 27%.

‘Beside the plate’

Not everyone is convinced that inflation is to blame. The main sources of Kohl’s woes are internal, said Neil Saunders, a US analyst at consulting firm GlobalData Plc.

“The company has lost track in terms of merchandising and lineup planning and appears to be taking a seemingly random buying approach,” Saunders said in an email.

Meanwhile, gross margin declined by 2.9 percentage points in the quarter due to transportation costs, product inflation and higher promotions.

The closely watched measure of comparable store sales fell 7.7%. Analysts were looking for a decline of 7.4%, according to the average of five estimates compiled by Bloomberg.

Kohl’s faced intense activist pressure to sell out after a long period of sluggish sales. The board recently took the company off the market after failing to agree on a potential $8 billion deal, just two months after rebuffing an attempt by investor Macellum Capital Management to reshuffle the board. administration.

On Thursday, the retailer said it had reached a $500 million accelerated share buyback deal. Saunders said the funds should instead be invested in store revitalization.

By Daniela Sirtori-Cortina

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