A dismal earnings outlook from Kohl’s has spooked investors ahead of the holiday-shopping season, dragging down its stock and weighing on fellow retailers.
Kohl’s stock (ticker: KSS) dropped 18% in Tuesday morning trading, bringing its year-to-date decline to 28%. That’s after the department-store chain sharply cut its full-year earnings forecast and said it would miss the FactSet consensus estimate by 24 cents a share.
The news has sparked selling in both Macy’s (M) and Nordstrom (JWN), down 11% and 7.2%, respectively, in morning trading. Those companies report their own earnings later this week—Macy’s before the market opens Thursday and Nordstrom after that day’s close.
Kohl’s has been the S&P 500’s worst performer so far Tuesday. Macy’s, Nordstrom, L Brands (LB) and Home Depot (HD) round out the index’s bottom five. The steep declines in these retailers’ stocks have wiped out $15.7 billion in aggregate market value so far today.
When the U.S. Census Bureau last Friday released its advance reading on October retail sales, it noted particular weakness among department stores. Sales across the category dropped 6.9% from a year earlier. It wasn’t just at the big boxes: Sales at clothing stores fell 2.7%, and dropped 3.4% at electronics and appliance stores.
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Brick-and-mortar retailers’ weakness continues to be e-commerce’s gain, suggesting the pain at Kohl’s and other stores is less about the American consumer and more about the stores themselves. The evidence: sales at nonstore retailers jumped 14.3% last month versus October 2018, last week’s retail sales report said.
Kohl’s says its partnership with Amazon.com (AMZN), whereby online shoppers can return items at Kohl’s stores, is helping drive “incremental traffic” both in stores and on its digital app. For the weakness during the quarter, new finance chief Jill Timm in part blamed “an increasingly competitive promotional environment.”
That’s nothing new, and it’s not likely to ease up soon. “We’re going to lean in, and make the short-term investment in pricing and promotion as we need to,” Timm said on the company’s earnings call.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
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November 19, 2019 at 11:43PM
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