Kohl’s sees soft sales in apparel and footwear, announces CEO transition
Kohl’s saw strong performance in key growth areas such as Sephora, home decor, gifting, and impulse.
The third quarter results did not meet the company’s expectations with net sales declining by 8.8% to $3.5bn in the third quarter of fiscal 2024. Comparable sales also fell by 9.3%.
For the third quarter ended 2 November 2024, the retailer’s net income plummeted to $22m, compared to $59m in the same quarter the previous year. Its earnings per diluted share (EPS) were down to $0.20 from $0.53 in Q3 FY23.
Operating income of Kohl’s also decreased to $98m in Q3 FY24 from $157m in Q3 FY24, representing a 2.7% operating margin, a drop of 120 basis points (bps) compared to last year.
Despite the overall downturn, Kohl’s gross margin improved slightly by 20bps to 39.1%.
Its selling, general & administrative expenses fell by 5.1% to $1.29bn, but as a percentage of total revenue, these costs increased by 125 basis points to 34.8%.
In the first nine months of fiscal 2024, sales of Kohl’s declined by 6.1% to $10.21bn from $10.87bn in the same period a year ago. Comparable sales were also down by 6.4%.
However, gross margin as a percentage of net sales saw a slight increase of 42 basis points to 39.4%.
Kohl’s chief executive officer Tom Kingsbury said: “Our third quarter results did not meet our expectations as sales remained soft in our apparel and footwear businesses. Although we had a strong collective performance across our key growth areas, including Sephora, home decor, gifting, and impulse, and also benefited from the opening of Babies “R” Us shops in 200 of our stores, these were unable to offset the declines in our core business. Importantly, we delivered gross margin expansion and managed expenses tightly in the quarter.”
Jill Timm, chief financial officer Kohl’s, said in the earnings call that the company is working to improve the balance of its inventory levels with a renewed focus on its private brands.
For 2024, the retailer is planning capital expenditures of around $500m, which will support investments in 350 impulse queuing lines, the opening of 140 small Sephora shops, the launch of 200 Babies “R” Us stores, and the opening of six new stores, including one relocation.
Looking ahead, Kohl’s has adjusted its full-year forecast for fiscal 2024, which comprises 52 weeks compared to the previous year’s 53 weeks.
The company now anticipates a net sales decrease of between 7% and 8%, with comparable sales potentially falling between 6% and 7%. It expects operating margin to be between 3.0% and 3.2%, and diluted EPS is projected in the range of $1.20 to $1.50.
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