Kohl's (KSS) is trading sharply lower today (-12%) following the company's report of disappointing Q1 (Apr) results this morning. A rough start to 2019 led KSS to report its first EPS miss after five quarters of beats.
Adjusted EPS fell 5% yr/yr to $0.61, but the market had been expecting some modest EPS growth. Net sales (excludes other revenue) fell 3.3% yr/yr to $3.82 bln, which also was below market expectations. In perhaps an even more ominous signal, KSS reduced its full year adjusted EPS guidance by a pretty large amount, to $5.15-5.45 from $5.80-6.15.
Same store comps are always a key metric for retailers, and the company's AprQ comps fell by 3.4%, whereas the market was expecting flat comps to slight growth. This follows comps of +1.0% in Q4 (Jan) and FY18 comps of +1.7%. Overall, the comps were pretty disappointing.
CEO Michelle Gass concedes that 2019 "has started off slower than we'd like, with our first quarter sales coming in below our expectation." Gass went on to say that the company is "actively addressing the opportunities that impacted our first quarter sales and [has] strong initiatives that will enhance [its] sales performance in the second half."
KSS does not provide a lot of color in the press release to contextualize the softness of results, but weather probably had a negative impact, as this spring has been notably wet and cool. We suspect that the lateness of Easter this year may also have had an impact.
It's worth noting that Kohl's has been revving up a partnership with Amazon (AMZN) through which its stores can act as free drop off points for returns of Amazon purchases, even without boxes or labels. It's called Amazon Returns at Kohl's. This had been just a pilot program, but KSS announced a month ago that the program would be rolled out to all 1,150 stores starting in July 2019. Kohl's also recently announced it "will expand its product relationship with Amazon by carrying Amazon products in more than 200 stores." Part of the benefit to Kohl's is that this would drive foot traffic to their stores, although AprQ did not turn out as expected.
Overall, this was not a good start to the year for Kohl's. The comps and the guidance seem to be spooking investors. Hopefully, KSS will see some improvement in JulQ, but this report and the lowered guidance make us nervous about the balance of 2019.