Excuses, Excuses at Kohls?: Greenberg

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Kohls Department Store

When it announced another train wreck in monthly sales this morning, Kohl’s did what it has been doing for months: blamed having too little inventory.

In a taped message, the company said, “Total inventories per brick and mortar store are up approximately 7 percent in retail dollars and down 5 percent in units. As the result of May's sales we now expect second-quarter comparable store sales to be modestly negative.”

Just one problem: In February CFO Wes McDonald told investors on the company’s earnings call said pretty much the same thing.

“We are also chasing units,” he said, referring to inventory. “We're trying to pull units in from second quarter into first quarter to — obviously if you are dropping prices you need to have more units behind it to drive the comp, and we are doing that.”

Then he added:

“Obviously it is not reflected in what we have guided for February. We guided below the quarter and we have only got a couple days left. But we expect to see that occur in time for that spring-break/Easter selling season at the end of March.”

Not only did that not happen by the end of March, it now doesn’t look like it’ll happen by the end of June.

“It’s a classic,” says retail analyst Rob Wilson of Tiburon Research. “Management is trying to keep the inventory excuse going. I always think they’re buying time because the management team creates the story, then crosses its fingers and hopes things will magically improve in six months.”

Kohl’s didn’t respond to my request for comment, but retail analyst Jan Kniffen of the retail consulting firm J. Rogers Kniffen, is more optimistic.

“I am convinced that the new stuff coming is better than the old stuff, and that they will have the inventories balanced by August deliveries,” he told me. “So, despite the horror show this morning, I like Kohl's.”

He adds, “While part of the Kohl's problem is self-inflicted, part of the problem is that customer. When product gets cheaper in August due to the return of cotton prices to sane levels, that customer will look healthier...and even anemic job growth is better than no growth at all!

It’s the self-inflicted part that would worry me.

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