Kohl's sales fall as retailer cites 'persistent financial pressures' on shoppers

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 had already fallen about 13% so far this ‌year, dipped in volatile morning trading before paring back losses.

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. "We're bringing value everywhere we can."

Average transaction values declined slightly in the second quarter as low- and middle-income shoppers seek bargains, the company said.

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, 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 named Bender permanent CEO last November to boost the business after years of shrinking profit and loss of ground to Amazon and off-price competitors, including Ross ​Stores.

The retailer 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.

Kohl's, 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 roughly $100 million share repurchase program this year.

FOCUS ON BACK-TO-SCHOOL

Kohl's started offering its fall products in July to capitalize on back-to-school shopping, Bender said.

The company said it plans to stick with its ⁠strategy of bringing seasonal inventory to shelves earlier than usual through the holiday season.

Bender pointed to the under-$25 back-to-school assortment as an example of Kohl's ​focus on value.

Still, while Kohl's has improved its value appeal ahead of the school year, the department store chain has not yet established itself as a top-of-mind destination for parents, said Saunders of GlobalData.

Improvement in categories such as footwear and home goods is "still not delivering positive trends in the business ‌overall," Goldman Sachs analyst Brooke Roach said in a research note.

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.

It 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.

The company expects ‌growth in annual net sales to be ​flat to a 1.5% fall, 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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