Kohl’s Pleased With Start of Year, Helping Turnaround Prospects

Mary Ross Gilbert, Bloomberg Intelligence, Senior Equity Analyst Covering Retail, discusses the latest earnings from Kohl's.

Kohl’s Corp. rebounded after the struggling department-store chain said it was pleased with its performance so far this year.

The positive sentiment given on a call with analysts came after the retailer reported a bigger sales drop than expected last quarter and gave an outlook in-line with Wall Street estimates.

The company’s shares rose as much as 9.3%, erasing a premarket decline. The stock had fallen 27% this year, compared with the Russell 2000 Index gaining roughly 3%.

The company has been trying to reverse years of falling revenue, and the fourth quarter was more of the same. Comparable sales declined 2.8%, more than twice the drop of the average analyst estimate. A major snowstorm in January cut that metric by 0.7 percentage points as about half of stores had to be closed, the company said. Losing Ground

The retailer “lost competitive ground during high-traffic shopping windows including Black Friday, Cyber Monday and the week following Christmas,” a company presentation said.

Kohl’s is also seeing a more value-conscious shopper, according to the presentation. And the chain said it expects low-to-middle-income consumers to remain pressured.

Despite the commentary on the first quarter, Kohl’s said it still sees comparable sales declining at a low-single-digit percentage during the period.

The company is trying to reignite sales after a turbulent year. The retailer fired its CEO for directing millions of dollars of business to someone with whom he had an undisclosed personal relationship. Michael Bender, chairman at the time, was named interim CEO and then permanently got the job in November. His strategy to improve declining sales is similar to his predecessor, including a focus on proprietary brands and improving the shopping experience online and in stores.

Kohl’s forecast comparable sales for this fiscal year to be little changed to down as much as 2%. Analysts on average projected a drop of 0.25%. Similarly, Wall Street projections for profit fall within the company’s range.

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