Kohl's warns of margin pressure, shares tumble 12%

(Reuters) -Kohl's Corp on Thursday warned of a hit to its full-year profit margin from higher labor and shipping costs as well as selling fewer products at full-price due to intensifying competition as the economy reopens, sending its shares down 12%.

The retailer, however, beat expectations for first-quarter profit as efficient inventory management allowed it to sell more products at full price and offset supply-chain disruptions triggered by the pandemic.

The company does not expect the current pricing environment to be sustainable though as economies reopen, easing those constraints.

"There is more full-priced selling that is available to us. So we're taking advantage of that now. We do believe as the year progresses ... some of those tailwinds will ease," Chief Financial Officer Jill Timm said on a post-earnings call.

With the economic reopening, U.S. retailers, including Kohl's, Macy's and Target, are moving past their inventory issues as they prepare to grab a bigger slice of consumer spending in the upcoming shopping boom.

Kohl's also said it expects its digital business, which made up only about 30% of its sales in the first quarter, to hurt its margins due to higher shipping costs.

The retailer also forecast annual sales growth largely below analysts' expectations.

"It's not just their comments on margins, specifically supply chain ... but they also just took a very prudent approach to the rest of the year," CFRA Research analyst Camilla Yanushevsky said.

Net sales rose about 70% to $3.66 billion for the quarter ended May 1, beating estimates.

(Reporting by Praveen Paramasivam in Bengaluru; Editing by Sriraj Kalluvila and Anil D'Silva)

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