Kohl’s (KSS) investors were pleasantly surprised as the struggling department store chain posted a surprise quarterly profit.
The retailer posted for the first quarter earnings per share (EPS) 13 cents, while analysts had expected a loss of 42 cents. Revenue fell 3.3% to $3.36 billion, which was slightly above estimates. Comparable store sales fell 4.3%, also slightly better than estimates.
CEO Tom Kingsbury attributed the results to a 6% reduction in inventory, improved store productivity and continued sales momentum at its Sephora stores in Kohl’s locations. He said the earnings “represented the first step as we work to improve sales and profit performance over the long term”.
Turnaround plan
Kingsbury officially took over as CEO in February 2023 and laid out a turnaround plan for the company, which had been plagued by falling sales and falling stock prices. Kohl’s has been under pressure from activist investors Ancora Holdings and Macellum Capital to boost the retailer’s fortunes, including calls to oust Kingsbury’s predecessor, Michelle Gass. She left in December 2022 to lead Levi Strauss (LEVI). The retailer also negotiated with the owner of the Vitamin Shoppe Franchise Group last year (NSR) about selling the company, but eventually ended the offer.
Kingsbury added that “there is still work to be done” and the macro environment “remains challenging.” He explained that’s why Kohl’s is reaffirming its full-year outlook for a decline in sales of 2% to 4% with EPS in the range of $2.10 to $2.70.
Kohl’s shares were up 6% as of 2:30 p.m. ET Wednesday. However, they have lost 46% of their value over the past year, far underperforming the broader benchmark Consumer sector sector, which is 7% more than in the same period.
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