What Happened?
Shares of department store chain Kohl’s (NYSE:KSS) fell 26.7% in the afternoon session after the company reported weak fourth-quarter results: EPS missed by a meaningful amount, and full-year EPS guidance fell significantly below expectations. The key takeaway from the quarter was a steep 9.4% decline in net sales, as comparable sales dropped 6.7%, reflecting weaker consumer demand.
Looking ahead, guidance was weak. Management guided for 5% to 7% decline in net sales for fiscal 2025. Overall, this was a challenging quarter as weak consumer spending and declining sales continue to put pressure on earnings.
The shares closed the day at $9.15, down 24.1% from previous close.
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What The Market Is Telling Us
Kohl’s shares are quite volatile and have had 18 moves greater than 5% over the last year. But moves this big are rare even for Kohl's and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 10 months ago when the stock dropped 27.9% on the news that the company reported first quarter results that missed significantly on same-store sales, leading to an EPS miss. Precisely, net sales decreased 5.3% and comparable sales fell 4.4%. The weakness was mostly driven by a significant decline in clearance sales, which negatively impacted overall comparable sales by more than 6%.
Looking ahead, the company lowered its full year outlook across the board. Management attributed the conservative guidance to the Q1 underperformance and the ongoing uncertainty in the consumer environment. Despite these challenges, Kohl's highlighted some positive aspects of its performance, including improved gross expansion (highlighting success with its improved pricing strategy), inventory reduction, and continued strong growth in Sephora. Overall, this was a bad quarter for Kohl's given the weak performance and poor guidance.
Kohl's is down 34.6% since the beginning of the year, and at $9.18 per share, it is trading 68.7% below its 52-week high of $29.35 from March 2024. Investors who bought $1,000 worth of Kohl’s shares 5 years ago would now be looking at an investment worth $322.67.
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