There is still no let up when it comes to the earnings pressure being felt at department stores.
Kohl’s Corp.’s stock is in the red Thursday — down nearly 12 percent at press time — after the firm released its Q1 earnings report, showing significant declines in revenues, profit and comparable-store sales.
“The first quarter was well below our expectations in the sales line as a very strong start to the quarter in February was overcome by softer-than-expected pre-Easter business and then a further deterioration in April versus our plans,” said Kevin Mansell, Kohl’s chairman, CEO and president, during the firm’s conference call. “Our seasonal businesses followed a similar trajectory as the total company sales trend.”
The Menomonee Falls, Wis.-based firm said its reported net income declined 87 percent, to $17 million, or 9 cents per diluted share, from $127 million, or 63 cents per diluted share, in the comparable quarter. Adjusted net income decreased 55 percent, to $58 million, or 31 cents per diluted share, from $127 million, or 63 cents per diluted share in the prior year. Market watchers were expecting diluted earnings per share of 37 cents.
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First-quarter sales slipped 3.7 percent, to $4 billion, from $4.1 billion in the comparable quarter, while comparable-store sales decreased 3.9 percent.
Mansell said sales in men’s and women’s outperformed the rest of the company with strength in active across both categories.
“Basic and dress clothing were relatively strong in men’s, but junior’s and intimate were better in women’s,” Mansell added. “Kids, accessories and shoes were similar to the company with relative strength in boys and girls, beauty and fine jewelry as well as kids’ shoes. Home was below the company with bedding, luggage and seasonal being outperformers with the balance being more difficult.”
Mansell the company did a “good job” managing inventory, gross margin and expenses during the quarter.
“Our gross margin rate dropped 140 basis points versus our projection of 150 basis points of a drop — due to better-than-planned promotional markdowns,” Mansell said. “Our inventory per store is now down 2 percent, in line with our expectations at the beginning of the year. We continue to expect to make progress on inventory throughout this year and we’re targeting end of second quarter levels of down mid-single digits on a per store basis.”
Despite “significant wage pressure” in stores, the CEO said he plans to continue the firm’s omnichannel investments and will focus on improving sales, particularly in the brick-and-mortar stores.