Off-price apparel retailer Kohl’s has reported a 4.2 per cent decline in net sales and a 5.1 per cent drop in comparable sales for the second quarter, ending August 3. 

CEO Tom Kingsbury cited a difficult consumer environment and softness in the core business for the results. 

“We have taken significant action to reposition Kohl’s for future growth,” he said. 

“During the second quarter, our customers exhibited more discretion in their spending, which pressured our sales even as customers transacted more frequently.”

Despite these challenges, the company posted diluted earnings per share of $0.59, up from $0.52 in the prior year, driven by a 59 basis point improvement in gross margin and a 9 per cent reduction in inventory.

Looking ahead, Kingsbury emphasised the company’s focus on aligning its product, value, and experience initiatives to appeal to both new and existing customers.

“Our conviction in our strategy remains strong, and our operating discipline, solid cash flow generation, and healthy balance sheet will continue to support us as we work to return Kohl’s to growth,” he added.

Neil Saunders, MD at GlobalData, said that while the numbers look dismal, they fall short of being catastrophic. 

“The problem is that this current decline is the latest in a long period of sales erosion,” he explains.

“Compared to the second quarter of 2019, Kohl’s sales have dropped by 20.4 per cent. It is nothing short of a chronic underperformance and marks Kohl’s out as being one of the big losers in retail.”

One of Kohl’s strategies is to use third-party brands – such as Sephora and Toys R Us – and offers to bolster sales. Saunders said that while there is nothing wrong with this, all these activities are “peripheral” and do nothing to fix the core of the business. 

“Unfortunately, the outlook for the balance of the year calls for more of the same. Kohl’s has started this year on a weak note, and it will end the year in much the same fashion,” Saunders concluded.