Kohl’s did not have a good finish to the last fiscal year, as sales declined at a faster rate in the fourth quarter due to several internal factors.
The department store chain’s net sales fell 3.9 per cent to $5 billion for the quarter ended January 31, with comparable sales down 2.8 per cent. This extended the 2.8 per cent drop in net sales in the third quarter.
GlobalData MD Neil Saunders said the performance was one of the weakest in mainstream retail over the period.
“In isolation, these numbers are poor. However, set against a wider context of previous years and market performance, they are even worse than they initially appear,” he added.
Kohl’s net sales have been down 23.9 per cent since the same period in 2019, Saunders said, adding that they have fallen in a market that has grown rapidly because of inflation and underlying volume increases.
According to the analyst, most of the decline was attributed to internal issues, given that Kohl’s own customers spent 2.7 per cent more in retail than they did during the prior year.
“From our data, the central reasons for this are that they find the stores hard to shop, the assortments uncompelling, and the prices too high for what they are getting. These things go to the heart of Kohl’s issues. It is a retailer that is simply not showing up in the right way for consumers who are increasingly discerning.”
The only bright spot during the quarter was the bottom-line improvement, with net income rising 160.4 per cent to $125 million.
“This is helpful as it gives Kohl’s time and flexibility to remedy its problems, but it does not automatically make Kohl’s a sustainable business,” Saunders said.
“This is especially so as some of the gains are technical rather than operational: an artificially low profit last year because of one-off costs, repayment of some debt, and so forth. And they do not change the fact that the company still has a stack of debt sitting on the balance sheet,” he added.
For the full year, net sales decreased 4 per cent to $14.8 billion, with comparable sales down 3.1 per cent.
The retailer expects net sales and comparable sales to be down 2 per cent to flat in the new fiscal year. Saunders said the outlook suggests that management is not entirely confident in a recovery program.
“The concerning thing is that as Kohl’s continues to wallow in its general disarray other retailers – like Target – are sharpening their acts. This will simply load more pressure on Kohl’s and means it slips further and further behind,” the analyst added.
