Kohl’s beats profit estimates on cost cuts, leaner inventory

FILE PHOTO: A sign marks a Kohl's store in Medford

By Savyata Mishra

(Reuters) -Kohl’s Corp beat estimates for quarterly profit on Wednesday, as leaner inventories, lower costs and fewer discounts helped the department store chain counter a broader retail slowdown.

Shares of Kohl’s, which fell more than 10% on Tuesday, were up 3.5% as the company joined peer department store operator Macy’s to also back its 2023 forecasts.

The company is in the midst of a turnaround under the watch of new Tom Kingsbury, who has made leaner inventories and targeted discounts his top priority after taking over the Kohl’s reins in February.

“We feel good about our performance, given the persistent macroeconomic pressures on our customers and that many of our strategic efforts are just underway,” Kingsbury said on a conference call.

“We’re able to benefit from less promotions that helped us offset some of the clearance,” he added.

Inventory declined 14% during the quarter as Kohl’s undertook stock clearance, leading to a 61 basis points drop in gross margin.

“It managed to sell more excess inventory and reduced its expenses, which helped it beat expectations,” Insider Intelligence analyst Zak Stambor said.

Retailers are trying to keep their inventories tight with the right kind of product mix as they head into the second half of the year, which includes the crucial holiday spending season.

“Many of our strategic efforts are just underway, which we expect will contribute incrementally in the back half of the year, and even more so in 2024 and beyond,” the CEO said.

The company earned 52 cents per share in the second quarter ended July 29, above analysts’ estimates of 22 cents.

Still, comparable sales fell by a steeper-than-expected 5% compared to analysts’ estimate of a 4.43% fall, according to Refinitiv IBES data.

The retailer maintained its forecast for per-share earnings of $2.10 to $2.70 and a drop in net sales of 2% to 4% for fiscal 2023.

(Reporting by Savyata Mishra in Bengaluru; Editing by Anil D’Silva)