Weak sales and CEO restructuring are causing shares to fall

Kohl’s Corp (NYSE:KSS) shares are trading lower after the company reported third-quarter results.

The company reported an 8.8% year-over-year decline in net sales to $3.507 billion, missing the consensus of $3.638 billion. Comparable sales fell 9.3% in the quarter. Total revenue was $3.710 billion.

Gross margin increased 20 basis points to 39.1% in the quarter. Operating income was $98 million for the quarter, compared to $157 million a year ago. Operating margin fell 120 basis points year-over-year to 2.7%.

Selling, general and administrative expenses decreased 5.1% year-over-year to $1.3 billion and SG&A margin was 34.8%, up 125 basis points year-over-year.

Earnings per share were 20 cents, missing analysts’ consensus estimate of 28 cents.

Inventory at the end of the quarter was $4.1 billion, down 3% year over year. Kohl’s had $174 million in cash and equivalents as of Nov. 2. Operating cash flow was $195 million.

On November 13, 2024, Kohl’s Board of Directors declared a quarterly cash dividend of 50 cents per share, payable on December 24 to shareholders of record on December 11.

Yesterday, Kohl’s announced that CEO Tom Kingsbury will step down on January 15, 2025.

He will continue to advise the new CEO and remain on the board until his retirement in May 2025, after which the board size will be reduced by one person. The Board of Directors has appointed Ashley Buchanan as CEO, effective January 15, 2025.

outlook: Kohl’s revised its FY24 earnings per share forecast to $1.20 to $1.50 (from $1.75 to $2.25) versus the Street View estimate of $1.80.

Kohl’s revised FY24 sales growth forecast calls for a decline of (7)% – (8)% (4%) – (6%). The company now records a comparable revenue decline of (6%) to (7%) in FY24 compared to (3%) to (5%) previously.

Kohl’s now forecasts FY24 operating margins of 3.0% to 3.2% (previously 3.4%-3.8%) and continues to record capital expenditures of approximately $500 million, including the expansion of its Sephora -Partnership and other branch-related investments.

Tom Kingsbury, CEO of Kohl, said: “Our third quarter results did not meet our expectations as sales in our apparel and footwear businesses remained weak. Although we delivered strong performance overall in our key growth areas, including Sephora, Home Decor, Gifts and Impulse, and also benefited from the opening of Babies “R” Us stores in 200 of our stores, these did not offset declines in our core business. “

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