(Bloomberg) -- Kohl’s Corp. lowered its earnings outlook, piling onto an already tough week for consumer companies as inflationary pressures cut into profits.

  • The department-store chain now expects full-year earnings per share, excluding some items, will be in the range of $6.45 to $6.85, down from a prior forecast of $7 to $7.50. Analysts had projected $7.03, on average. Operating margin is expected to be in the range of 7% to 7.2%, compared with the prior view of 7.2% to 7.5%.
  • Net sales are now seen flat to rising 1% this year, Kohl’s said in Thursday in conjunction with its first-quarter earnings release. The company had projected full-year sales growth of 2% to 3% in February.
  • See more details.

Key Insights

  • “Sales considerably weakened in April as we encountered macro headwinds related to lapping last year’s stimulus and an inflationary consumer environment,” Chief Executive Officer Michelle Gass said in the statement.
  • The disappointing outlook comes after retail giants Walmart Inc. and Target Corp. both trimmed their profit forecasts this week, citing higher costs for transportation, merchandise and labor that weren’t fully offset by higher prices. Several retail companies are still on deck to report their quarterly results, including Macy’s Inc., Nordstrom Inc. and Gap Inc. next week.
  • In an ominous signal late Wednesday, Kohl’s said that its chief merchandising officer is leaving the company immediately and its chief marketing officer will step down on June 1.
  • Kohl’s faces increased scrutiny after management last week fended off an activist investor’s two-year push to overhaul the board. The company said Thursday that Goldman Sachs, its adviser, has engaged with over 25 parties as it continues to review strategic alternatives. Analysts will certainly press the company for an update on the conference call that’s slated to start at 9 a.m. New York time.
  • Like other department-store chains, Kohl’s has been grappling with increased competition from discount retailers, and inflation raises the stakes even more as shoppers look for better bargains. The Menomonee Falls, Wisconsin-based retailer remains positive on its plan to drive sales and attract customers indoors with its partnership with cosmetics chain Sephora.

Market Reaction

  • Kohl’s fell 2.2% at 7:19 a.m. New York time before the start of regular trading. The stock had slumped 30% in the 12 months through Wednesday’s close, while the benchmark S&P 500 Index was down 5% over that time.

Get More

  • See Kohl’s estimates.

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