Kohl’s Corp (NYSE:KSS) shares plummeted nearly 20% in premarket trading Tuesday after the retailer reported disappointing third-quarter results and significantly lowered its full-year outlook, citing weak apparel and footwear sales.
The department store chain posted adjusted earnings per share of $0.20 for the quarter ended November 2, falling short of analysts' expectations of $0.31.
Revenue declined 8.8% YoY to $3.51 billion, missing the consensus estimate of $3.65 billion. Comparable sales decreased 9.3% compared to the same period last year.
CEO Tom Kingsbury acknowledged the disappointing performance, stating, "Our third quarter results did not meet our expectations as sales remained soft in our apparel and footwear businesses."
He added that while growth areas like Sephora and home decor performed well, they were "unable to offset the declines in our core business."
Kohl's slashed its fiscal year 2024 earnings guidance to a range of $1.20 to $1.50 per share, well below its previous forecast and the Wall Street consensus of $1.86.
The company now expects full-year net sales to decline 7% to 8%, with comparable sales projected to fall 6% to 7%. The company had previously expected comparable sales to decline 3-5%.
"Although warm weather certainly hurt results as it did at many retailers, the magnitude of the comp decline at KSS is concerning," Citi analysts led by Paul Lejuez commented.
"Though Sephora continues to perform relatively well, this implies the rest of the business is down double-digits. The company has tried a number of initiatives such as adding baby, gifting, and impulse but in a very competitive environment it does not seem to be moving the dial," they added.
Despite the sales challenges, Kohl's reported a slight improvement in gross margin, which expanded by 20 basis points to 39.1%. The company also reduced inventory levels by 3% YoY.
In a separate announcement, Kohl's revealed that Kingsbury will step down as CEO effective January 15, 2025, to be succeeded by retail veteran Ashley Buchanan.
Senad Karaahmetovic contributed to this report.