Kohl's Stock Plunges 20% After Massive Earnings Miss

Kohl's shares plummeted over 25% on Thursday after the company reported an unexpected loss per share, significantly missing Wall Street's expectations for a modest profit.

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This sharp decline marks the stock’s largest single-day percentage drop ever.

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Here’s a breakdown of Kohl’s fiscal first-quarter performance compared to Wall Street’s expectations, based on an analyst survey by LSEG:

• Loss per share: 24 cents vs. an expected profit of 4 cents
• Revenue: $3.18 billion vs. an expected $3.34 billion

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Kohl's reported a net loss of $27 million, or a loss of 24 cents per share, compared to a net profit of $14 million, or 13 cents per share, a year earlier.

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Net sales fell 5.3% to $3.18 billion compared to the previous year, with comparable sales down 4.4%.

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The company also revised its 2024 guidance downward. Kohl’s now anticipates full-year net sales will decline between 2% and 4%, whereas Wall Street analysts polled by LSEG had expected a slight increase of 0.2%.

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For full-year diluted earnings per share, Kohl’s projects a range of $1.25 to $1.85, which is significantly lower than the $2.34 per share expected, according to LSEG.

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CEO Tom Kingsbury acknowledged the challenges ahead in a statement, saying, "We recognize we have more work to do in areas of our business. We are approaching our financial outlook for the year more conservatively given the first quarter underperformance and the ongoing uncertainty in the consumer environment."

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Despite the overall disappointing performance, Kingsbury highlighted positive trends in the women’s category and the continued robust growth of the retailer’s Sephora shop-in-shop partnership. In March, Kohl’s announced plans to add similar in-store outposts of Babies R Us to about 200 locations.

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“We continue to have high conviction in our strategy and believe that our key growth initiatives, including Sephora, home decor, gifting, impulse, and our upcoming partnership with Babies ‘R’ Us, will contribute more meaningfully going forward,” he said.

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The fiscal report underscores the struggles Kohl’s is facing in a challenging retail environment. The unexpected loss and lowered guidance reflect broader issues such as decreased consumer spending and competition. Kohl’s attempts to adapt through strategic partnerships and new store concepts are a crucial part of its recovery plan, but immediate results remain elusive.

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Analysts are closely watching how Kohl’s strategic moves will impact its future performance. The Sephora partnership has shown promise, and the introduction of Babies R Us in-store locations is expected to drive foot traffic and sales. However, these initiatives need time to show significant impact.

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Kohl’s conservative outlook for the year underscores the uncertainties in the market. With consumers being cautious about spending, retailers like Kohl’s must navigate these challenges carefully. The company's focus on key growth areas and strategic partnerships is a step in the right direction, but execution will be key to reversing its fortunes.

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In summary, Kohl’s disappointing first-quarter results and cautious outlook for 2024 have led to a significant drop in its stock price. The company faces considerable challenges but is banking on strategic initiatives like the Sephora partnership and the new Babies R Us store formats to drive future growth. The retail landscape remains uncertain, and Kohl’s will need to execute its strategies effectively to regain investor confidence and improve its financial performance.

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