Kohl’s cuts annual forecast, as it gets stung with inflation

NEW YORK » Kohl’s Corp. cut its annual earnings and sales forecast, as the department store chain joins a string of retailers stung with soaring inflation.

The reduction, announced Thursday, came as it reported fiscal firstquarter results that came below analysts’ expectations. Sales at stores opened at least year, a key measure, dropped 5.2% as shoppers scrutinized their purchases.

Like many department stores, Kohl’s had struggled before the pandemic, but the health crisis wielded a big blow to sales. The company’s business was rebounding as customers were going out to social events and buying dressier clothes. But like other stores, it’s now grappling with supply chain issues and surging inflation that are causing pain to its business. Moreover, shoppers, facing with higher costs on everything from gas to milk, are rethinking their purchases.

It’s been a brutal earnings season for many retailers so far. Target reported Wednesday that its profit tumbled 52% compared with the same period last year in an environment of rising costs for things like fuel, and also a lightening quick return by consumers to more normalized spending. On Tuesday, Walmart’s shares tumbled about 17% for similar reasons after it posted quarterly results.

“The year has started out below our expectations,” said Kohl’s CEO Michelle Gass in a statement. She noted that following a strong start to the quarter with sales at stores up by low single digits, sales considerably weakened in April as it encountered surging inflation and lapped against last year’s government stimulus plan.

Gass told analysts on a conference call on Thursday that the sales drop was driven by declines in home and children’s clothing. The store’s home business had been a winner in the early days of the pandemic as shoppers stayed home, but sales are slowing down as they go out socially. She said Kohl’s is pivoting to outdoor furniture, expanded decor, children’s beds and furnishings in the pet category. Children’s clothing sales were dragged down by the unseasonably warm weather.

But Gass said that high inflation is making shoppers’ rethink their purchases, noting that Kohl’s is keeping its customers, but the average total purchase price is dropping.

“They’re coming into the store, and they’re being a bit more mindful of the brands they’re buying and what’s all going in their basket,” she said.