USA- Department store chain Kohl’s has reported an unexpected net loss of US$27 million (24 cents per share) for Q1 2024 following a 5.3% net sales decline to US$3.8 billion compared to the predicted US$3.34 billion amid demand disruptions caused by high inflation.
The company’s shares declined by 26% following the surprise net loss announcement in the company’s worst single-day percentage decline. Kohl’s expressed disappointment following the surprise net loss posting and share price decline.
Tom Kingsbury, Kohl’s CEO said, “Kohl’s first-quarter results did not meet our expectations and are not reflective of the direction we are heading with our strategic initiatives.”
The department store chain has also cut its profits and annual sales forecasts, now projecting a net sales decrease of between 2% and 4%. The company now predicts annual earnings per share of US$1.25-1.85 from the previously predicted US$2.10-2.70 per share.
High inflation has caused many shoppers to be frugal with their spending, prioritizing the purchase of essential items over discretionary goods like electronics, apparel, and household goods. High inflation has particularly affected the company’s middle-income customers, who face pressures from high interest rates.
Inflation has caused an increase in credit card interest rates, which translates to increased spending, especially for one-off consumer goods like electronics, which has caused a decline in demand. These dynamics have made consumers responsive to discounts and other value deals.
The surprise net loss report is in contrast with Q1 2024 reports of other top US retailers. Rival Abercrombie reported a 22% year-over-year (YoY) net sales increase of US$1 billion and a net income of US$130 million in the best first quarter financial results in Abercromble’s history.
Market analysts attribute Kohl’s dismal performance to inadequate branding and high inflation.
Zak Stambor, senior analyst at Emarketer, said, “Kohl’s has been too reliant on other brands such as Sephora, Amazon, and now Babies R Us to drive traffic rather than distinguishing its core brand identity.“
The retail store’s overreliance on other brands means it faces competition from other retailers offering discounts and other value deals, which has also contributed to the surprise net sales reduction.
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