Kohl's Reports 8.8% Decline in Net Sales for Third Quarter of 2024

Kohl's Corporation reported a decline in financial performance for the third quarter of 2024, with net sales decreasing by 8.8% to $3.5 billion compared to $3.8 billion in the same period last year. Total revenue also fell to $3.7 billion from $4.1 billion, marking a decrease of 8.5%. The company's net income for the quarter was $22 million, or $0.20 per diluted share, down from $59 million, or $0.53 per diluted share, in the prior year. Year-to-date figures showed a similar trend, with net sales of $10.2 billion, down from $10.9 billion, and net income of $61 million compared to $131 million in the previous year.

The decline in sales was attributed to a decrease in average transaction value and transaction volume, with average transaction value down approximately 6% and transaction volume down about 3% in the third quarter. Sales across most product categories fell, with the exception of Accessories, which saw a 5% increase driven by strong performance from Sephora sales. The gross margin as a percentage of net sales improved slightly to 39.1%, up 20 basis points from the previous year, primarily due to effective inventory management and lower freight costs.

Kohl's has made strategic moves to enhance its market position, including the ongoing expansion of its partnership with Sephora, which is expected to include 140 new small-format shops in 2024. The company also plans to invest approximately $500 million in capital expenditures, which will support store-related investments and the launch of new product lines, including 200 Babies “R” Us shops. However, the company is not planning any share repurchases during the current year, focusing instead on maintaining liquidity and managing debt.

Operationally, Kohl's reported a decrease in customer engagement, with comparable sales down 9.3% in the third quarter. Digital sales also fell by 7%, although digital penetration remained stable at 26% of net sales. The company’s inventory levels decreased by 3% year-over-year, reflecting a disciplined approach to inventory management. As of November 2, 2024, Kohl's had 1,178 stores and continued to face challenges in the retail environment, including increased competition and changing consumer behaviors.

Looking ahead, Kohl's expects net sales to decline by 7% to 8% for the full fiscal year 2024, with comparable sales projected to decrease by 6% to 7%. The company anticipates an operating margin in the range of 3.0% to 3.2% and diluted earnings per share between $1.20 and $1.50. The Board of Directors declared a quarterly cash dividend of $0.50 per share, payable on December 24, 2024, indicating a commitment to returning value to shareholders despite the current financial challenges.