(Bloomberg) -- Kohl’s Corp. shares plunged to the lowest level since 2020 after the company cut its full-year sales outlook, signaling that its turnaround efforts are fizzling in an increasingly difficult retail environment.
The earnings, along with a slew of other consumer-company reports on Tuesday, illustrate how this year’s holiday season could be a tough slog as spending softens. Retailers that cater to middle-income shoppers are being squeezed out by shoppers who are increasingly budget-conscious and shying away from big-ticket purchases and other discretionary spending.
Best Buy Co. also cut its full-year guidance on Tuesday, citing worse-than-expected demand from shoppers who are holding off on buying until the season’s big sales events.
“We expected lower demand between sales events, but the impact was even steeper than we estimated,” Best Buy CEO Corie Barry said on a call with analysts on Tuesday.
Also Tuesday, peanut butter and jelly maker JM Smucker Co., which had a mostly strong quarter, said its Hostess brand was an outlier, in part due to “diminished discretionary income.”
Last week, Target Corp. shares fell more than 20% after the retailer cut its profit outlook and said shoppers are spending less on items like clothing and home goods.
Retailers are fighting over a dwindling pool of discretionary dollars, and companies that provide a more compelling product selection are seeing gains where their rivals are slipping.
Walmart Inc. has seen growth from shoppers who are drawn to its deals and grocery selection. Dick’s Sporting Goods Inc. also bucked the trend, raising its full-year sales outlook Tuesday after posting strong results in the back-to-school season, spurred by high demand for sports gear.
But even Dick’s said they’re being “appropriately cautious” about the holiday season due to an uncertain economic environment — and fewer shopping days between Black Friday and Christmas.
“People are waking up and talking about it,” Dick’s CEO Lauren Hobart said Tuesday, referring to the shorter calendar between holidays. “I’m hearing even people in my life talk about how, oh, my gosh, Christmas is coming.”
‘Serious Questions’
Kohl’s now expects its 2024 comparable sales to fall between 6% and 7%, lower than its earlier guidance of a 3% to 5% drop. The store’s turnaround strategy will now be turned over to Ashley Buchanan, 50, who will take over as chief executive officer in January and replace Tom Kingsbury, 72.
Comparable sales fell 9.3% in the quarter that ended Nov. 2. That was lower than the average analyst estimate of a drop of 5.2%, and marks the eleventh consecutive quarterly revenue decline.
“Our third quarter results did not meet our expectations as sales remained soft in our apparel and footwear businesses,” Kingsbury said in the statement. “We are approaching our financial outlook for the year more conservatively given the third-quarter underperformance and our expectation for a highly competitive holiday season.”
Kohl’s stock had fallen 36% so far this year through Monday’s close, compared with a 26% gain for the Russell 1000 Index.
Kingsbury joined the Kohl’s board in 2021 amid an activist campaign and was named permanent CEO in early 2023. Now Buchanan needs to find a way to take on rivals like Walmart and T.J. Maxx-owner TJX Cos. The company’s previous strategy to drive traffic by deepening partnerships with Sephora and Babies “R” Us hasn’t been enough to drive growth.
“Some serious questions must now be asked about Kohl’s strategy for turning around the company,” Neil Saunders, managing director of GlobalData, said in a note. “Sadly, there have been too few efforts to fix things, and the few attempts that have been made have fallen short.”
--With assistance from Lily Meier, Kim Bhasin, Alicia Tang and Deena Shanker.
(Updates with details about Dick’s and other retailers. A previous version contained an incorrect full-year 2024 outlook.)
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