Kohl's sales dampened by weak discretionary spending, shares fall 8%

By Anuja Bharat Mistry, Shania S Thomas ‌and Danielle Kaye

Aug ​26 (Reuters) - Kohl's ​on Wednesday missed Wall Street estimates for second-quarter sales as muted spending on women's clothing and skincare products offset gains from the department-store chain's push to revitalize the ‌business.

The company's shares, which have fallen more than 20% so far this year, tumbled ⁠about 8% in morning trading.

Despite growth in categories including home goods and youth apparel, CEO Michael Bender said that "we know ‌there is more work to be ‌done" to attract cash-strapped shoppers.

"We are operating in a challenging macroeconomic environment where our customers are experiencing persistent financial pressures from inflation in their everyday expenses like gas and food," Bender said ​in a post-earnings call.

U.S. consumer sentiment deteriorated in August and retail sales fell for the first time in nine months in July, underscoring an increasingly "selective" shopping trend among middle- and lower-income households ⁠in the face of stubborn inflation, even as wealthier shoppers remain resilient.

Consumer caution around non-essential purchases has hurt retailers from Kohl's to off-price ​store operators like TJX .

Kohl's also faces strong competition from Ross Stores and e-commerce giant Amazon.com for value-focused shoppers.

Kohl's reported quarterly revenue of $3.32 billion, compared with analysts' ​estimate of $3.35 billion, according to data compiled by LSEG.

Its comparable ‌sales fell 0.9% after dropping 4.2% a year ago.

"The fact that comparable sales remain in decline – the eighteenth consecutive quarter when they have dipped – does not ⁠convince us that Kohl's is a business in full recovery," said Neil Saunders, managing director of GlobalData, adding that Kohl's is still losing market share across major categories.

The company, however, raised its annual profit forecast after benefiting from $150 ⁠million in tariff refunds received during the reported quarter and also said it would resume its about $100 million share ​repurchase program this year.

The mid-tier retailer has been in the midst of a long-running turnaround aimed at reviving demand and lifting margins.

The company's quarterly gross margin grew 305 basis points from last year to 43%, helped by tariff refunds.

Kohl's ‌has also been targeting value-conscious shoppers by investing in its proprietary brands and adding more coupon-eligible labels, among other measures.

The company expects fiscal-year 2026 adjusted ‌earnings of $1.80 to $2.40 per share, above its prior forecast of $1.00 to $1.60 per share.

It expects growth in annual net sales ⁠to be flat to a fall of ‌1.5%, compared with its previous ​range of flat or a 2% decline.

(Reporting by Anuja Bharat Mistry and Shania S Thomas in Bengaluru and Danielle Kaye in New York; Editing by Shinjini Ganguli and ‌Pooja Desai)

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