Kohl’s posted strong performance in key growth areas such as Sephora, home decor, gift items and impulse items.
Third-quarter results fell short of the company’s expectations, with net sales down 8.8% to $3.5 billion in the third quarter of fiscal 2024. Comparable sales also fell 9.3%.
For the third quarter ended November 2, 2024, the retailer’s net income plummeted to $22 million, compared to $59 million in the same quarter last year. Earnings per diluted share (EPS) fell to $0.20 from $0.53 in Q3 FY23.
Kohl’s operating income also fell from $157 million in the third quarter of FY24 to $98 million in the third quarter of FY24, representing an operating margin of 2.7%, a decline of 120 basis points (bps) compared to last year.
Despite the overall downturn, Kohl’s gross margin improved slightly by 20 basis points to 39.1%.
Selling, general and administrative expenses decreased 5.1% to $1.29 billion, but as a percentage of total sales, these costs increased 125 basis points to 34.8%.
In the first nine months of fiscal 2024, Kohl’s sales fell 6.1% to $10.21 billion, compared to $10.87 billion in the same period a year ago. Comparable sales also fell by 6.4%.
However, the gross margin as a percentage of net sales increased slightly by 42 basis points to 39.4%.
Kohl’s CEO Tom Kingsbury said: “Our third quarter results fell short of our expectations as sales remained weak in our apparel and footwear businesses. While we delivered strong aggregate performance in our key growth areas, including Sephora, home decor, gift and impulse, and also benefited from the opening of Babies “R” Us stores in 200 of our stores, these could not offset the declines. in our core business. Importantly, we expanded gross margin in the quarter and tightly managed costs.”
Kohl’s Chief Financial Officer Jill Timm said in the earnings call that the company is working to improve the balance of its inventory levels with a renewed focus on its private brands.
Through 2024, the retailer plans capital expenditures of approximately $500 million, supporting investments in 350 impulse queue lines, the opening of 140 small Sephora stores, the launch of 200 Babies “R” Us stores and the opening of six new stores. , including one move.
Looking ahead, Kohl’s has adjusted its full-year forecast for fiscal 2024, which consists of 52 weeks, compared to the previous year’s 53 weeks.
The company now expects net sales to decline between 7% and 8%, with comparable sales potentially down between 6% and 7%. It expects operating margin to be between 3.0% and 3.2%, and diluted earnings per share is expected to be between $1.20 and $1.50.
“We are not satisfied with our 2024 performance and are taking aggressive action to reverse the revenue decline. We need to perform at a higher level and ensure we put the customer first in everything we do. We are taking a more conservative approach to our financial guidance for the year given the underperformance in the third quarter and our expectation of a highly competitive holiday season,” said Tom Kingsbury.
The company recently announced that Tom Kingsbury will step down as CEO effective January 15, 2025. Tom will continue in an advisory role to the new CEO and remain on Kohl’s board of directors until his retirement in May 2025. The board also appointed retail professional Ashley Buchanan as the new CEO and board member, effective January 15, 2025.
“Kohl’s Sees Soft Sales in Apparel and Shoes, Announces CEO Transition” was originally created and published by Just Style, a brand owned by GlobalData.
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