Kohl’s (KSS) earnings Q12023

Consumer spending is slowing, but these two Club retailers are well-positioned to ride out the storm

People walk near a Kohl’s department store entranceway on June 07, 2022 in Doral, Florida.

Joe Raedle | Getty Images

Kohl’s shares spiked early Wednesday as the struggling retailer posted a surprise profit while it chases a turnaround.

The company’s shares jumped more than 12% in premarket trading.

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Consumer spending is slowing, but these two Club retailers are well-positioned to ride out the stormCNBC Investing Club

Kohl’s reiterated its full-year outlook. It said it expects net sales to range between a decline of 2% and 4%, including the approximately 1% impact from having one more week of sales this year. It said it expects earnings per share to range from $2.10 to $2.70, excluding nonrecurring charges.

Here’s how the retailer did for the quarter that ended April 29 compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

  • Earnings per share: 13 cents vs. a loss of 42 cents expected
  • Revenue: $3.36 billion vs. $3.34 billion

In the fiscal first quarter, Kohl’s net sales fell to $3.36 billion from $3.47 billion in the year-ago period.

Comparable sales declined 4.3% in the quarter, roughly in line with the 4.5% drop expected by Wall Street, according to StreetAccount.

The company reported net income of $14 million, or 13 cents per share, compared with $14 million, or 11 cents per share, a year earlier.

Kohl’s surprise quarterly profit comes after multiple quarters of disappointing sales and a sinking stock price. Last year, the retailer became a target for activist investors Ancora Holdings and Macellum Capital, which pushed the company to oust its then-CEO Michelle Gass and shake up its board. Kohl’s also discussed and then ended a bid last year to sell its business to Vitamin Shoppe owner Franchise Group.

Since then, Kohl’s has tapped a new CEO: Tom Kingsbury, former chief executive of off-price retailer Burlington Stores. Gass, its former CEO, left to become the next leader of Levi Strauss.

In more recent months, Kohl’s efforts to reinvent itself and woo shoppers have run into other obstacles. Many middle-income consumers feel squeezed by inflation and are buying fewer discretionary items, such as clothing. That contributed to a big loss in Kohl’s holiday quarter and weak outlook, which the Wisconsin-based company reiterated Wednesday.

Despite that, Kingsbury said Kohl’s made progress in the fiscal first quarter. He said the company has reduced excess inventory, attracted customers with Sephora shops and made stores more productive.

“Our first quarter results were in line with our expectations and represented a first step as we work to drive sales and earnings performance over the long-term,” he said in a news release.

Inventory declined significantly compared with the year-ago period. Kohl’s inventory was $3.5 billion at the end of the quarter, a drop of 6% year over year. Investors have closely watched those levels, since the glut of merchandise at many retailers has led to higher markdowns and lower profits.

Shares of Kohl’s closed Tuesday at $19.27. That’s less than half of its 52-high, which was $47.63. The company’s stock has tumbled nearly 23% so far this year — even as the S&P 500 has risen about 8% and the retail-focused XRT has fallen nearly 2%.

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