Kohl's profit forecast misses estimates, shares slip

Kohl’s Corp  shares slumped as much as 12 percent on Tuesday after the department store operator forecast full-year earnings largely below estimates, blaming rising shipping costs and higher discounts during the holiday season.

Several retailers, including TJX Cos Inc earlier in the day, have warned that a shortage of truck drivers, new driver regulations and higher fuel prices would make moving freight costlier this year.
Traditional retailers are also being forced to match holiday promotions offered by online rivals that are starting much earlier every year and with increased frequency.

Chief Financial Officer Bruce Besanko said on a post-earnings call that there is going to be higher cost of shipping as Kohl’s invests more in its online business.

“We also know that in the fourth quarter, there is just generally more promotion that happens. And so we’ll take effect of that in our gross margin outlook,” Besanko added.

Kohl’s raised the lower end of its adjusted full-year earnings forecast to $5.35-$5.55 per share from its earlier forecast of $5.15-$5.55. But the midpoint of the range was below the analyst average estimate of $5.51, according to IBES data from Refinitiv.

While the upcoming holiday season is widely expected to help rekindle sales after years of declines due to competition from online rivals, weak outlooks from Kohl’s and other big department store chains such as Macy’s and Nordstrom Inc indicate that the growth is still some time away.

“Overall, the market backdrop has been quite volatile lately,” Oppenheimer & Co analysts said in a note.
“Investors seem concerned ...and have been willing to lighten positions in retail - especially on any results less than stellar,” they added.

Kohl’s posted a 2.5 percent increase in same-store sales for the third quarter ended Nov. 3, beating the 1.74 percent rise analysts on average had expected.

Net sales rose 1.3 percent to $4.63 billion, topping the average estimate of $4.36 billion.

Excluding items, the company earned 98 cents per share, 2 cents more than the average analyst estimate.

Kohl’s shares were down 8.1 percent at $65.27 in afternoon trading.