Retail

Kohl's CEO says this is the 'low point' of 2020, as margins take a hit from coronavirus

Key Points
  • Kohl's gross margins fell to 17.3% from 36.8% a year ago.
  • "Our hope is that this is just an extraordinary event to flatten the curve," Kohl's CEO Michelle Gass tells CNBC.
Kohl's Chief Executive Officer Michelle Gass
Source: Kohl's

Kohl's Chief Executive Michelle Gass anticipates the worst is behind her business, as the retailer reported a quarterly net loss on Tuesday, hit hard by the coronavirus pandemic

"I think this is the low point of the year," Gass said in a phone interview. "For half the quarter, our stores had no sales." 

Kohl's net sales tanked 43.5% during the period ended May 2. 

"Our hope is that this is just an extraordinary event to flatten the curve," Gass said about all of Kohl's being forced temporarily shut in mid-March, along with many other retailers' locations. "We were in this nonessential category ... it was mandated." 

Though Kohl's digital sales accelerated during the quarter, rising 24% overall, that also meant there was added pressure on Kohl's profits. The company said digital sales during the first quarter represented about 45% of total sales, compared with 21% of total sales a year ago.

With increased shipping costs and amplified promotions to try to clear inventory, Kohl's gross margins fell to 17.3% from 36.8% a year ago. It said heightened shipping costs lowered gross margins by 250 basis points. 

"As stores open [back] up, we won't be at that level of penetration," Gass said about Kohl's digital business. 

About 50% of Kohl's more than 1,100 locations are already reopened, in states that have lifted lockdown restrictions. And the company said those stores have been doing roughly 50% to 60% of the productivity that Kohl's would typically see this time of year. 

"There are customers in our stores and ... we're happy about that," Gass said. 

Kohl's shares were recently down almost 6%. The stock has fallen more than 65% this year. Kohl's has a market cap of about $2.8 billion. 

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