1Q16 sales miss estimates
Kohl’s (KSS) disappointed its investors with lower-than-expected sales of about $4.0 billion in 1Q16 ended April 30, 2016. The company missed analysts’ sales estimate of $4.1 billion. The sales in 1Q16 declined by 3.7% on a year-over-year basis compared to sales growth of 0.8% and 1.3% in 4Q15 and 1Q15, respectively.
Factors that impacted 1Q16 sales
In the 1Q16 conference call, Kevin Mansell, Kohl’s chair, CEO, and president, stated that the strong sales experienced in February were offset by lower-than-expected pre-Easter business and further deterioration in April. Kohl’s sales in 1Q16 were also impacted by the poor performance of spring seasonal goods in March and April.
Kohl’s same-store sales declined by 3.9% in 1Q16. This was the largest same-store decline since the first quarter of fiscal 2009 when the company’s same-store sales declined by 4.2% amid recessionary conditions.
In 1Q16, transactions per store were down by 4.8%. In terms of merchandise categories, men’s and women’s were the strongest categories while the home category experienced weakness.
In the 1Q16 conference call, Wesley McDonald, Kohl’s chief financial officer, stated that there were some company-specific issues from a marketing perspective that impacted the company’s performance in the quarter and that these are being rectified. Kohl’s constitutes 0.3% of the iShares U.S. Consumer Services ETF (IYC).
Weakness in the sector
Kohl’s 1Q16 sales reflected the weakness in the department store sector due to heightened competition from online retailers like Amazon (AMZN) and off-price retailers like TJX Companies (TJX) and Ross Stores (ROST). Macy’s (M) 1Q16 sales declined by 7.4% for several reasons like lower spending by international tourists at the company’s key locations. In 1Q16, Nordstrom (JWN) reported lower-than-expected sales growth of 1.1% and Dillard’s (DDS) sales declined by 4.6%.
Let’s discuss the contraction in Kohl’s margins in the next part of this series.