Retailers across the country have continued to struggle in 2019 as online shopping continues to become the dominant way that shoppers use to buy products and services. Another casualty in this ongoing retail apocalypse is one of the top department store chains in the country. Kohls (NYSE: KSS) saw its stock plummet after reporting falling revenues for the quarter.
The company reported on Tuesday that its profit fell by an alarming 24% in comparison to the same time last year, with the retailer further cutting its expectations ahead of the holiday season, which usually is an optimistic period for retail brands. This marks the second time that Kohl’s management cut its forecast for 2019 as the company continues to struggle to make financial headwinds.
“3Q sales softer than expected while gross margin percentage deteriorated further which is never a good combination. We see competitive pressures rising and other retailers taking share (e.g. TGT),” said Jefferies analyst Randal Konik in a note to clients on Tuesday. “KSS choosing to increase investments depresses EPS and may not provide a visible ROI for some time, and finally the Amazon partnership doesn’t appear to be providing meaningful benefits yet. Our thesis is being tested and we must adopt a more conservative EPS view & valuation approach.”
The company has been attempting to reinvent itself for the past while in an effort to change its trajectory, but pressure and competition from online giants such as Amazon continue to cut into Kohl’s revenues. The company has downsized many of its stores while renting out the new space in an effort to further cut costs. Unfortunately for the company, this seems to have had little effect. Other major retailers, such as Macy’s and Nordstrom, are expected to report their quarterly results later this week.
Shares of Kohls ended up falling by 19.5% over the course of the day. Over the past several months, the stock has fallen by 38%. With retail brands across the board, with the possible exception of giants such as Walmart and companies catering to specialized markets, continuing to fall, prospects for the entire sector seem grimmer than ever.
Other Wall Street analysts have gone to say that department store stocks in general have had a disappointing year and that shareholders will need to face the reality of slowing sales and increasing inventories across the entire sector. Bank of America analysts Heather Balsky and Lorraine Hutchinson commented last week in a research note that much of this also had to due to “overly optimistic ordering” as well as stockpiling of inventory ahead of potential tariffs. As for how the sector will sort these issues out, it doesn’t seem likely that the industry will do much better over the coming quarters.
Kohls Company Profile
Kohl’s operates 1,155 department stores in 49 states that sell moderately priced private-label and national brand clothing, shoes, accessories, cosmetics, and home furnishings. Most of these stores are in strip centers. Kohl’s also operates an e-commerce site (kohls.com) and 12 Fila athletic apparel outlets. Women’s apparel constitutes Kohl’s largest line of business, generating approximately 28% of its sales. The retailer, headquartered in Menomonee Falls, Wisconsin, opened its first department store in 1962. – Warrior Trading News
