Kohl's Joins Macy's, J.C. Penney in Reporting Weak Sales -- Update

By Suzanne Kapner And Chelsey Dulaney 

Kohl's Corp. posted disappointing sales growth in the first quarter, raising concerns that a strategic plan unveiled last year to jump start the struggling retailer was faltering.

Kohl's shares plunged 11.5% to $65.94 Thursday morning, after the retailer said sales at existing stores grew 1.4% in the three months through May 2. The pace was slower than the 1.5% to 2.5% growth Kohl's has forecast for the year, and is also a marked slowdown from the fourth quarter, when sales at existing stores grew 3.7%.

The report followed lackluster results from rivals Macy's Inc. and J.C. Penney Co. that have raised further concerns about sluggishness among consumers. In Kohl's case, the culprit was a lack of shopper traffic.

"If there is any shortfall to our internal expectations on sales, it was really about traffic," Chief Executive Kevin Mansell said. "We're looking to drive increases in traffic, and traffic was essentially flat in the first quarter."

For the quarter, Kohl's profit edged up to $127 million, compared with $125 million a year earlier, as total sales grew 1.3% to $4.1 billion.

Kohl's ranked among the country's fastest-growing retailers during the early part of the last decade, but its sales have since stalled. Last fall, the retailer unveiled a multiyear plan to return to growth. It included stocking more national brands, offering more compelling savings, tailoring merchandise to local tastes and better targeting promotions.

The moves seemed to be paying off. Kohl's reported a jump in fourth quarter sales at established stores, its first same-store sales gain in a year.

The most recent quarter cut short that budding turnaround. Kohl's said sales were unusually weak in February, but picked up in March and April. Helping to drive sales was a 2.7% increase shopper spending per trip, although that was partially offset by a 1.3% decline in items purchased per transaction.

The results offer further evidence that consumers have hit a soft patch this spring. Some analysts had been predicting that pent-up demand from shoppers would broadly lift retail sales, but government data showed they were flat in April as consumers remained cautious. Retail sales have been flat or down in four of the past five months, a trend that could weigh on the broader economy.

Write to Suzanne Kapner at [e-mail] and Chelsey Dulaney at [e-mail]

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