Kohl’s sees soft sales in apparel and footwear, announces CEO transition

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Kohl’s expects net sales to fall between 7% and 8% in FY24. Credit: refrina/Shutterstock.

Kohl’s saw strong performance in key growth areas such as Sephora, Home Decor, Gifts and Impulse.

Third-quarter results fell short of the company’s expectations, with net revenue falling by 8.8% to 3.5 billion. USD in the third quarter of fiscal 2024. Comparable sales were also down 9.3%.

For the third quarter ended Nov. 2, 2024, the retailer’s net income fell to $22 million. compared to $59 million. in the same quarter of the previous year. Its earnings per diluted share (EPS) fell to $0.20 from $0.53 in Q3 FY23.

Kohl’s operating income also fell to $98 million. in Q3 FY24 from $157m in Q3 FY24, representing an operating margin of 2.7%, down 120 basis points (bps) compared to last year.

Despite the overall slowdown, Kohl’s gross margin improved slightly by 20bps to 39.1%.

Its selling, general and administrative expenses fell by 5.1% to 1.29 billion. USD, but as a percentage of total revenue, these costs increased by 125 basis points to 34.8%.

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In the first nine months of fiscal 2024, Kohl’s sales fell 6.1% to $10.21 billion. from $10.87 billion. in the same period a year ago. Comparable sales also fell 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 CEO Tom Kingsbury said: “Our third-quarter results fell short of 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 Furnishings, Gifts and momentum, and also benefited from the opening of Babies “R” Us stores in 200 of our stores, these were unable to offset the decline in our core business. Importantly, we delivered gross margin expansion and managed expenses tightly in the quarter.”

Jill Timm, Kohl’s chief financial officer, 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 plans capital expenditures of about $500 million, which will support investments in 350 impulse queue lines, the opening of 140 small Sephora stores, the launch of 200 Babies “R” Us stores and the opening of six new shops, including a move.

Looking ahead, Kohl’s adjusted its full-year forecast for fiscal 2024, which includes 52 weeks compared to the previous year’s 53 weeks.

The company now expects a decline in net revenue 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 expected in the range of $1.20 to $1.50.

“We are not satisfied with our performance in 2024 and are taking aggressive steps to reverse the sales declines. We must execute at a higher level and ensure that we put the customer first in everything we do. We are approaching our financial outlook for the year more conservative given the underperformance in the third quarter and our expectation of a very competitive holiday season,” added Tom Kingsbury.

The company recently disclosed that Tom Kingsbury will step down as CEO effective January 15, 2025. Tom will continue to serve as an advisory director to the incoming CEO and remain on the Kohl’s board until his retirement in May 2025. The board also appointed retail professional Ashley Buchanan as new CEO and board member from 15 January 2025.