Retail sales trends have been pretty interesting of late. In addition to online shopping at Amazon, consumers increased their spending at off-price retailers like TJ Maxx and home improvement stores like Home Depot but reduced their spending sharply at department store chains like Macy’s, Kohl’s and JC Penney. 

Kohl’s Corp (KSS) reported an 87% plunge in profit for the first quarter,sending shares tumbling after the report.

About the Company

Headquartered in Menomonee Falls, WI, Kohl’s operates about 1,200 stores across 49 states and an e-commerce site. Their stores are family-focused, selling moderately-priced apparel, footwear and accessories for women, men and children and home products. The department store chain mainly targets middle-class consumers. Falling estimates sent the stock to a Zacks Rank #5 (Strong Sell).

Weak Results Reflect Rising Challenges

Kohl’s reported earnings of $0.31 per share for Q1, missing the Zacks Consensus Estimate of $0.36 by 13.9%. Earnings also declined a significant 50% from the prior-year quarter due to a drop in sales and lower gross margin.

Net sales of $3.97 billion also missed the Zacks Consensus Estimate of $4.12 billion and were also down 3.7% from the prior-year quarter.

Falling Estimates

Analysts have slashed their estimates for the company after weak results.Zacks Consensus Estimates for the current and next fiscal year have fallen to $3.92 per share and $4.14 per share from $4.12 and $4.40 respectively, before the results.

The Bottom Line

In addition to disappointing consumer spending and mall traffic, the retail space is going through a shift toward online shopping. With tightening labor markets, “wage pressure’ has also started hurting retailers. The company plans to close 18 underperforming stores this year. It remains to be seen whether retailers like Kohl’s will be able to reorganize their operations and improve their profitability going forward.

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