On November 20, 2018, Kohl’s Corp saw its shares slide after the department store chain said rising shipping expenses and deeper holiday markdowns would pressure full-year earnings.
The company’s warning came as retailers across the sector faced higher freight costs, with TJX Cos Inc among those pointing to truck driver shortages, new driver rules and fuel prices as added burdens. Kohl’s also said traditional stores were being forced to keep pace with online competitors that were rolling out promotions earlier and more often.
Chief Financial Officer Bruce Besanko said on the post-earnings call that shipping costs would climb as Kohl’s put more money into its online business. He also said the fourth quarter usually brings heavier promotion, which would affect gross margin.
Kohl’s raised the bottom end of its adjusted full-year earnings forecast to $5.35 to $5.55 per share, from $5.15 to $5.55 previously. Even so, the midpoint of that range remained below the analyst average estimate of $5.51, according to IBES data from Refinitiv.
The warning landed against a broader retail backdrop that has remained under pressure from online competition. Macy’s and Nordstrom Inc had also issued weak outlooks, reinforcing doubts that a strong holiday season would quickly restore growth for department stores.
Oppenheimer & Co analysts said the market had become volatile and that investors were willing to reduce exposure to retail names, especially when results were not outstanding.
Despite the cautious outlook, Kohl’s reported a 2.5 percent rise in same-store sales for the third quarter ended Nov. 3, beating the 1.74 percent increase analysts had expected. Net sales climbed 1.3 percent to $4.63 billion, ahead of the $4.36 billion average estimate. Excluding items, the company earned 98 cents per share, topping expectations by 2 cents.
FILE PHOTO: A Kohl’s store sign is seen in Broomfield, Colorado, February 27, 2014. REUTERS/Rick Wilking
By afternoon trading, Kohl’s shares were down 8.1 percent at $65.27, after falling as much as 12 percent earlier in the session.
Reporting by Jaslein Mahil and Siddharth Cavale in Bengaluru; Editing by Saumyadeb Chakrabarty and Sriraj Kalluvila.
