Kohl's Corp. (KSS) shares slumped lower Thursday after the retailer slashed its full-year profit forecast amid a pullback in discretionary spending by inflation-hit consumers.
Kohl's said adjusted earnings for the three months ending in July came in at $1.11 per share, down 55.2% from the same period last year but topping the Street consensus forecast of $1.03 per share. Group revenues, Kohl's said, fell 8% to $4.09 billion, topping analysts' estimates of a $3.85 billion tally.
Kohl's, however, said it expects weakening demand over the back half of the year, with a shift towards value-orientated private brands and fewer shopping trips and smaller ticket purchases "for the foreseeable future".
That will likely pull full-year earnings to a range of between $2.80 and $3.20 per share, well below its prior forecast of between $6.45 to $6.85 per share
“Second quarter results were impacted by a weakening macro environment, high inflation and dampened consumer spending, which especially pressured our middle-income customers," said CEO Michelle Gass. "We have adjusted our plans, implementing actions to reduce inventory and lower expenses to account for a softer demand outlook. Kohl’s has navigated difficult periods in the past and I am confident in our ability to successfully manage through the current uncertainty."
Kohl's shares were marked 5.2% lower in early trading Thursday to change hands at $32.22 each, extending their year-to-date decline to around 35%.
Earlier this week, 13-F filings with the Securities and Exchange Commission indicated that activists investors at Starboard Value have slashed their stake in the struggling retailer following attempts to buy it earlier this year.
The filing showed Starboard has cut around 80% of its 2.59% stake in Kohl's, which it began accumulating in January, over the three months ending in June. The fund now owns around 535,000 shares, according to its 13-F report.
Last month, Kohl's ended talks with the Franchise Group FRG over a possible $8 billion takeover, following similar interest from private equity firms and retail asset investors, including Sycamore Partners, Simon Property Group SPG and Brookfield Asset Management..
