Kohl's Slumps but Notes Upturn -- WSJ

By Suzanne Kapner 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 21, 2019).

Kohl's Corp. on Tuesday reported its third consecutive decline in quarterly sales, though it said business improved toward the end of the period and it maintained its guidance for the year.

The results prompted concern by analysts and investors that the strong growth Kohl's had posted for most of last year, which had helped it buck a downward trend among department stores, has come to an end. The shares fell 6.9% on Tuesday and are down 43% over the past year.

"There can be no doubt that Kohl's has been blown off course," said Neil Saunders, a managing director with GlobalData PLC.

Total sales fell 3.1% to $4.4 billion for the quarter ended Aug. 3. Sales at stores open at least a year fell 2.9%

Net income dropped to $247 million from $292 million a year earlier on higher online shipping costs and steeper promotions to clear unsold goods.

Kohl's Chief Executive Michelle Gass said business improved in the last six weeks of the quarter, with sales at stores open at least a year rising 1%. She added that the positive sales trend continued into August as the company got off to a strong start for the back-to-school season.

Other department stores, including Macy's Inc. and J.C. Penney Co., reported disappointing results last week for their summer quarter, sending their shares lower. Walmart Inc. was one of the few standouts, continuing its string of strong growth.

Retailers are facing the threat of high costs because of increased tariffs on goods imported from China. On Tuesday, Home Depot Inc. lowered its sales forecast for the current year, citing the potential impact of tariffs as well as lower lumber prices.

Even retailers that posted higher sales are being judged harshly by investors. T.J. Maxx parent TJX Cos. said Tuesday that sales at stores open at least a year rose 2% in the most recent quarter. That is on top of a 6% increase in the same period a year earlier. Foot traffic to its stores has increased for 20 consecutive quarters. Its shares fell slightly to $51.51 on Tuesday.

Analysts are concerned that T.J. Maxx and its sister chain Marshalls might be facing more competition as department stores offer deeper discounts and resale sites such as The RealReal Inc. and thredUP Inc. gain popularity.

Mr. Saunders of GlobalData said the above-average levels of discounting across many apparel retailers "gave those shoppers looking for bargains more choice and more reason to shop around, something that had a tangible impact on both T.J. Maxx and Marshalls."

Kohl's has been trying to combat sluggish sales with initiatives such as one that lets shoppers return items they bought on Amazon.com Inc. to any of its more than 1,100 stores -- no box required.

Ms. Gass said the Amazon returns partnership is bringing both new and existing customers into Kohl's stores, particularly at off-peak times. She said the venture is expected to be a profitable one for Kohl's.

The retailer is also working with designers to launch exclusive collections, such as one from Jason Wu that will arrive in stores for the holiday season. And it is working with Facebook Inc. to find emerging digital brands to showcase in its stores.

Write to Suzanne Kapner at [e-mail]

(END) Dow Jones Newswires

August 21, 2019 02:47 ET (06:47 GMT)

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