Kohl’s is the latest retailer to report consumer pullback in Q3, as spending weakens amid inflation.
The retailer pulled its guidance for the full year and did not share projections for Q4, citing “macroeconomic headwinds” and its recent CEO transition. Kohl’s downgraded its outlook in August citing inflation and weaker consumer spending, especially among middle-income customers.
Kohl’s was hit by a pullback in spending from middle-income consumers, who purchased fewer items per trip and traded down to cheaper brands, said Kohl’s CFO Jill Timm in a call with investors. The softness began in late October and persisted through November, in part driven by the earlier than usual holiday shopping season, Timm said.
In the third quarter, comparable sales dropped 6.9% and net sales dropped 7.2%. Diluted earnings per share were $0.82.
This month, Kohl’s announced that CEO Michelle Gass would step down from her role as CEO and member of the board of directors, effective December 2, to join Levi Strauss & Co. as president and CEO in waiting.
Kohl’s said it is currently undergoing a search for Gass’ successor and specifically looking for candidate with brand building experience, omnichannel expertise and an ability to foster an inclusive culture. The company does not currently have a timeline in regards to a planned succession.
While Kohl’s did not offer guidance for the fourth quarter, the company said it would amplify its value messaging and feature its private brands more prominently throughout the holiday season to cater to value-driven consumers.
TImm also confirmed that it will continue to evaluate ways to maximize value for its real-estate real-estate but will “not engage in a transformative sales-leaseback transaction at this time.” Reports in September revealed that Kohl’s was in talks with private equity firm Oak Street Real Estate Capital LLC to discuss potentially selling its real estate assets for around $2 billion.