Kohl’s Stock Sinks after Dismal Q1 Results and Bleak Outlook

Kohl’s (KSS) stock was down 10.7% as of 11:10 AM EDT on May 21 after the company reported lower-than-expected results for the first quarter of fiscal 2019, which ended on May 4. Kohl’s net sales fell 3.3% to $3.82 billion in the quarter and lagged analysts’ estimate of $3.94 billion. The company’s revenue (including net sales and other revenue) fell 2.9% to $4.09 billion. Kohl’s same-store sales fell 3.4% in the first quarter of fiscal 2019, which was quite a deterioration compared to its 3.6% same-store sales growth in the first quarter of fiscal 2018.

Slow sales in February adversely affected Kohl’s top line in the quarter. Rival JCPenney (JCP) also reported its first-quarter earnings results today and disappointed investors with a 5.5% fall in its same-store sales.

Kohl’s first-quarter adjusted EPS fell 4.7% to $0.61, far below analysts’ forecast of $0.68. Kohl’s gross margin contracted six basis points to 36.8%, and its operating margin contracted to 3.1% in the first quarter of fiscal 2019 from 5.3% in the first quarter of fiscal 2018.

Following the release of its first-quarter results, Kohl’s lowered its fiscal 2019 EPS guidance to the range of $5.15–$5.45 compared to its previously issued outlook of $5.80–$6.15.

Kohl’s has been making several strategic moves to improve its sales, including focusing on activewear and entering into strategic partnerships with Amazon (AMZN) to improve its customer traffic. But intense competition from online retailers and uncertain macroeconomic conditions seem to be weighing on Kohl’s and other department stores. Macy’s (M) net sales fell 0.7% to $5.50 billion in the first quarter of fiscal 2019, but its same-store sales rose 0.7% on an owned-plus-licensed basis.

Kohl’s expects its strategic efforts to drive improvement in the second half of fiscal 2019.