What Happened?
Shares of department store chain Kohl’s (NYSE:KSS) fell 22.5% in the morning session after the company reported weak third-quarter results, which missed analysts' EPS and operating profit estimates. Sales were also underwhelming, down 9% y/y, and in line with estimates. Management added that "sales remained soft in our apparel and footwear businesses." Furthermore, its full-year EPS guidance fell short of Wall Street's estimates. Overall, this was a weaker quarter.
Following the results, Tom Kingsbury is expected to step down as CEO, effective January 15, 2025. He will be replaced by retail veteran Ashley Buchanan.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Kohl's? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Kohl’s shares are very volatile and have had 22 moves greater than 5% over the last year. But moves this big are rare even for Kohl's and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 6 months ago when the stock dropped 27.9% on the news that the company reported first quarter results that missed significantly on same-store sales, leading to an EPS miss. Precisely, net sales decreased 5.3% and comparable sales fell 4.4%. The weakness was mostly driven by a significant decline in clearance sales, which negatively impacted overall comparable sales by more than 6%.
Looking ahead, the company lowered its full year outlook across the board. Management attributed the conservative guidance to the Q1 underperformance and the ongoing uncertainty in the consumer environment. Despite these challenges, Kohl's highlighted some positive aspects of its performance, including improved gross expansion (highlighting success with its improved pricing strategy), inventory reduction, and continued strong growth in Sephora.
Overall, this was a bad quarter for Kohl's given the weak performance and poor guidance.
Kohl's is down 45.5% since the beginning of the year, and at $15.28 per share, it is trading 47.9% below its 52-week high of $29.36 from December 2023. Investors who bought $1,000 worth of Kohl’s shares 5 years ago would now be looking at an investment worth $318.08.
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