The department store chain presented a bleak outlook for 2022 on Thursday, saying it expects full-year sales to fall 5% to 6% compared to a year ago and blames high inflation for preventing shoppers — particularly the middle incomes – spend more in its stores. The company also reported a decline in revenue and profit for the quarter ended July 30.
Kohl’s shares fell more than 4% in morning trading.
But the economy is not the only problem. kohls, (KSS) comparable to other major chains, including: Target (TGT) and walmart (WMT), is stuck with a lot of excess inventory that it can’t clean up. The chain’s inventory was 48% higher in the quarter than at the same time last year.
“We have adjusted our plans and implemented actions to reduce inventory and reduce costs to account for weaker demand,” Kohl CEO Michelle Gass said in a statement.
With more than 1,100 stores in the US and annual sales of approximately $19 billion, Kohl’s is the largest department store chain in the United States. But the company is struggling to find a path for itself.
Kohl’s floated and then withdrew the idea of selling itself to Franchise Group (FRG), a holding company that owns The Vitamin Shoppe and other retail brands.
The retailer is trying different tactics to stay relevant, especially for younger consumers. It recently partnered with popular cosmetic brand Sephora to open mini Sephora stores in its locations. Kohl’s said the move has helped it gain a million new customers since August, who are younger, more diverse and shop more often than the average consumer.
And last week, the retailer announced it was rolling out a self-collection option across all of its stores for online orders within a two-hour window.
But all these efforts, while necessary for Kohl’s, cannot fully camouflage the chain’s most fundamental problem, said Neil Saunders, retail analyst and managing director at GlobalData Retail.
“In our opinion, the main source of Kohl’s woes is internal. Most notably, the company has lost the plot in merchandising and assortment planning and appears to be taking a seemingly random approach to buying. The result is a jumble of disjointed products in stores, which is exacerbated by a very serious deterioration in retail standards,” Saunders said in a note on Thursday.
“In the past, while a little uninspired, Kohl’s was disciplined and neat in its presentation. Over the past year, all that has gone out the window,” Saunders said. “In this kind of economic environment, consumers will quickly abandon purchases and stores that require too much effort for too little reward.”