Kohl’s (KSS) earnings Q4 2022

People shop at Kohl’s department store amid the coronavirus outbreak on September 5, 2020 in San Francisco, California.

Liu Guanguan | China News Service | Getty Images

Kohl’s shares sunk on Wednesday after the retailer posted a big loss and a sales decline of about 7% in the holiday quarter.

The company also shared a weak outlook for the year ahead. It said it anticipates net sales to range between a decline of 2% and a decline of 4%, including the impact of the 53rd week of the year that is worth about 1% year over year. It said it expects diluted earnings per share to range from $2.10 to $2.70, excluding non-recurring charges.

Here’s how Kohl’s did for the quarter that ended Jan. 28 compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

  • Loss per share: $2.49 vs. expected earnings of 98 cents a share
  • Revenue: $5.78 billion vs. $5.99 billion

In the fourth quarter, the company’s net income fell dramatically to a loss of $273 million, or a loss of $2.49 per share, from a net income of $299 million, or $2.20 a share.

Its same-store sales dropped 6.6% in the quarter.

Tom Kingsbury, the company’s newly named CEO, attributed the retailer’s disappointing results to “the ongoing persistent inflationary environment.” The company’s news release also said its profit margins were hurt by more clearance prices and inflated product costs.

Yet he said the company is taking steps to “better position the business for 2023.”

“I am confident that our efforts will drive improved, and more consistent, sales and earnings performance over the long-term,” he said in a news release.

Kohl’s is not the only retailer that has felt a pullback as consumers spend more on food, housing and other necessities. Walmart, Target and Macy’s have also cited inflationary pressures. Yet Kohl’s has missed out on the significant sales gains of the early years of the pandemic, a time when consumers had extra dollars from stimulus checks and were largely spending on goods instead of services.

Overall retail spending has grown by 28.4% compared with 2019, according to an analysis by research firm GlobalData. During that same three-year period, spending at Kohl’s fell by 15.4% and profit at the company plummeted by 203%.

As Kohl’s performance lagged, it became a target for activist investors. It’s recently dealt with leadership changes, along with a more challenging economic backdrop.

Then-CEO Michelle Gass announced in November that she was leaving to become president and CEO-in-training at Levi Strauss & Co. Her departure came after Ancora Holdings and Macellum Advisors questioned Kohl’s turnaround strategy, pushed for improvement to its sales trends and called for new leadership.

Pressure from those investors gained momentum after Kohl’s ended talks this summer to sell to the Franchise Group,¬†owner of The Vitamin Shoppe.

Kohl’s announced last month that Kingsbury, who served as interim CEO, would step into the position permanently. He is the former CEO of Burlington Stores. It said at the time that it had reached a cooperative agreement with Macellum Advisors, as it named Kingsbury to the role.

The retailer had declined to provide a holiday-quarter outlook and pulled its full-year guidance in November, saying inflation had hurt consumer spending and made future sales patterns hard to predict.

Along with other retailers, Kohl’s has also struggled with a glut of unsold inventory as shoppers bought less of categories like home goods and activewear that had been popular during the pandemic. That’s forced companies to turn to more markdowns.

Kohl’s inventory remains elevated, up 4% year over year as of the end of the fourth quarter, the company said.

As of Tuesday’s close, Kohl’s stock is up about 11% this year, outperforming the approximately 3% gain of the S&P 500. Shares closed at $28.04, bringing the company’s market value to nearly $3.1 billion.

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