Picky American retail customers still didn’t want the product Kohl’s was trying to sell.
The mid-market department store chain slashed its full-year guidance after reporting first-quarter results that fell woefully short on nearly every metric. Comparable sales, which measure the performance of stores open at least a year, fell 4.4% in the quarter ended May 4, the ninth consecutive decline. Analysts had expected a 1.7% decline.
Although Kohl’s is offering deep discounts during this period, the company said
Sales of clearance items actually declined, causing comparable sales to be lower than expected. On Thursday, the company was touting discounts of up to 85% on its website.
The stock plunged 27% in New York trading, its biggest drop ever. The stock has fallen 5% this year through Wednesday, while the Russell 1,000 index has gained 9.7%.
“Our customers continue to be stressed by a number of economic factors, including high interest rates and inflation,” Chief Executive Tom Kingsbury said on a conference call. “While spending by our higher-income customers remains stable, our middle-income customers continue to be impacted.”
The Menomonee Falls, Wisconsin-based retail chain has been partnering with other brands to attract customers, most notably with cosmetics chain Sephora. While Kohl’s reported strong traffic growth at Sephora, it doesn’t appear to be translating into many sales outside of stores-in-stores.
The company, which appointed board member Kingsbury as CEO in February 2023 after a lengthy search, said the quarter’s results “did not meet our expectations and did not reflect the forward direction of our strategic initiatives.”
Thursday’s retail results were further evidence that inflation-weary consumers are looking for value and are picky about what value means to them.
Foot Locker Inc. shares soared 32% to a record high after saying profits far exceeded analysts’ expectations. Still, Chief Executive Mary Dillon remained cautious in an interview.
“Our consumers continue to face pressures from inflation, interest rates and reduced savings,” Dillon said. “But there’s a reason for that. They decide where to spend the money.
Dollar General Inc., which is struggling to turn a profit under Chief Executive Todd Vasos, said Thursday sales growth was driven by gains in traffic and market share.
, even though shoppers spend less per transaction on average. Consumer goods are growing, but discretionary items such as clothing, seasonal products and home products are declining.
“Their shopping behavior remains very value-oriented,” Vasos said of consumers on the call, adding that there is higher demand for private label products and items for $1 or less.
Best Buy Co., the last major U.S. electronics chain that specializes in discretionary goods, saw comparable sales fall 6.1% in its most recent quarter, missing expectations. Still, the company’s bottom line performance was strong thanks to membership and service offerings.
“Customers remain very deal-focused and attracted by more predictable sales moments,” Chief Executive Corey Barry said on a conference call with analysts. She said the broader environment saw more discounts than expected, though across categories. The situation is different. Home appliance promotions increased in the first quarter.
Shares of discount chain Burlington Stores Inc. surged 21% in New York, the most since November, after the discount chain reported comparable sales and earnings that beat expectations. The company also raised its full-year guidance. “The February quarter got off to a slow start, likely due to bad weather and tax refund delays, but our sales trends have since picked up,” Chief Executive Michael O’Sullivan said in a statement.
— With assistance from Jaewon Kang and Kim Bhasin
