Kohl's shares stumble after bad earnings miss

Reuters with CNBC.com
Daniel Acker | Bloomberg | Getty Images

Department store chain Kohl's cut its full-year earnings forecast after reporting lower-than-expected quarterly results as fewer customers visited its stores, leading to a surprise fall in same-store sales.

Shares of Kohl's, which caters mainly to middle-income shoppers, fell sharply after the report Thursday amid concerns of increasing competition going into the holiday season.

The company reported a 1.6 percent drop in same-store sales in the third quarter ended Nov. 2, missing the average analyst estimate of an increase of 0.7 percent, according to Thomson Reuters.

Kohl's results mirrored those of Wal-Mart Stores, which reported an unexpected decline in U.S. comparable-store sales, citing a competitive retail environment.

Close rival Macy's, however, reported higher-than-expected quarterly sales on Wednesday, helped by more discounts and promotions.

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"With Macy's raising the top-line bar yesterday, (Kohl's) material same-store sales shortfall raises competitive concerns going into the fourth quarter," JP Morgan analyst Matthew Boss wrote in a note.

Kohl's Chief Financial Officer Wesley McDonald told analysts on a conference call that inventories at the end of October were up 2 percent from a year earlier.

Chief Executive Kevin Mansell said customer traffic was lower than expected in September, but improved at the end of October.

The company said it would increase its spending on marketing ahead of the holiday season to attract more shoppers.

Kohl's also said it would sell women's apparel and accessories brand Juicy Couture and men's apparel brand IZOD beginning fall 2014.

The company will license Juicy Couture from Authentic Brands Group and IZOD from PVH.

Juicy Couture, once owned by Fifth & Pacific, was sold to Authentic Brands last month for $195 million.

Kohl's said it expected same-store sales to be flat to up 2 percent in the current quarter. Total sales are expected to fall 2-4 percent.

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The company cut its full-year earnings forecast to $4.08-$4.23 per share from $4.15-$4.35. Analysts were expecting $4.23 per share.

"This guidance assumes continued weakness at the company," Stifel Nicolaus analyst Richard Jaffe wrote in a note.

Kohl's net income fell 18 percent to $177 million, or 81 cents per share, in the third quarter. Revenue declined 1 percent to $4.44 billion.

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Analysts on average had expected profit of 86 cents per share on revenue of $4.55 billion.

—By Reuters