Weak apparel consumption prompts Kohl's (KSS.US) to lower full-year sales outlook

Due to softness in its apparel and footwear businesses, Kohl's (KSS.US) lowered its full-year sales expectations. Shares fell 17% before the market opened after the earnings release. The stock has fallen 36% this year through Monday's close, while the Russell 1000 index has risen 26%.

Kohl's reported third-quarter revenue of $3.5 billion, down 7.9% year over year, missing expectations; net income of $22 million, down from $59 million a year ago; and diluted EPS of $0.20, down from $0.53 a year ago.

Net sales fell 8.8% year over year to $3.5 billion, with comparable sales down 9.3%, below the 5.19% average decline forecast by analysts — and the 11th consecutive decline for the metric. The company now expects fourth-quarter comparable sales to decline 7%, below its prior 6% forecast.

Inventory was $4.1 billion in the quarter, down 3% year over year. Operating cash flow used was $195 million.

Kohl's expects full-year net sales to decline 7%-8% year over year, with comparable sales expected to decline 6%-7%; and expects full-year diluted EPS to be in the range of $1.20 to $1.50.

Additionally, its turnaround strategy will now be handed over to Ashley Buchanan, 50, who will take over as CEO in January, replacing Tom Kingsbury, 72.

The department store chain targets middle- and lower-income consumers but has struggled to attract customers as competitors Walmart and TJ Maxx owner TJX have expanded their market share. Kingsbury, who joined the board as an activist in 2021 and was appointed permanent CEO in early 2023, tried to deepen the company's partnerships with Sephora and Babies "R" Us to increase traffic but the shift has not yet materialized.