Kohl’s and JC Penney both delivered disappointing first-quarter earnings reports Tuesday morning, putting a damper on other department stores, as their stocks tumbled.
Shares of Kohl’s and Penney were both down more than 10% in premarket trading, as Macy‘s stock was down a little more than 1%, and Nordstrom‘s stock dropped 1.7%.
America’s department stores continue to struggle to move merchandise off of shelves, when more consumers are opting to buy things online, from places like Amazon, Rent the Runway and Stitch Fix, or are heading directly to brands like Nike and Kate Spade to buy items directly from them.
Faced with these challenges, Kohl’s and Penney have taken different approaches to try and wow customers. Kohl’s has been leaning into its success selling brands like Nike and Under Armour by devoting more square footage in some stores to athletic apparel. It’s also dividing up some of its shops to lease space next door to tenants like discount grocery store chain Aldi and Planet Fitness.
Penney, which analysts argue is in a worse position than Kohl’s because its stores are typically within antiquated shopping malls, has shut dozens of stores over the years, hoping a pruning of its real estate will allow it to focus on more profitable locations. But its sales continue to drop, and it hasn’t benefited as much from rival Sears’ struggles as anticipated.
Kohl’s on Tuesday missed earnings expectations and slashed its outlook for the full year. The retailer also for the first time in two years missed same-store sales expectations, as its tie-up with Amazon and emphasis on athletic apparel weren’t enough to get shoppers into stores. CEO Michelle Gass said the year “started off slower than we’d like.”
Penney, meanwhile, missed Wall Street’s earnings and same-store sales estimates. The company attributed a drop in sales to its decision in February to halt selling appliances in stores. CEO Jill Soltau said the company is “working to reestablish the fundamentals of retail” at Penney.
Kohl’s reported adjusted earnings of 61 cents a share on sales of $4.09 billion. Analysts were calling for earnings per share of 68 cents on revenue of $3.94 billion, based on Refinitiv data.
Sales at Kohl’s stores open for at least 12 months fell 3.4%, while analysts were calling for a drop of just 0.2%.
Kohl’s said it now expects adjusted earnings per share to fall within a range of $5.15 to $5.45, compared to a prior range of $5.80 to $6.15. Analysts had been calling for earnings of $6.04 per share.
Penney reported a net loss of 46 cents per share on sales of $2.56 million. Analysts were calling for a net loss of 38 cents a share on sales of $2.56 million.
Penney’s same-store sales dropped 5.5%, worse than an expected drop of 4.2%.
The results aren’t as strong of those of Macy’s, which just last week crushed Wall Street estimates. But Macy’s sales during the first quarter still were down from a year ago, as the department store operator is looking for ways to refresh its bricks-and-mortar stores to keep them exciting for customers, just like its rivals.
All of these companies and Nordstrom, which is set to report quarterly earnings after the bell on Tuesday, also have the threat of additional tariffs on footwear and apparel going into effect hanging over them. The White House is still considering new 25% tariffs on roughly $300 billion of goods from China, including clothing.
The 25% tariffs would have a significant impact on Penney’s in-house brands, Soltau told analysts Tuesday on a post-earnings conference call.
Add Comment