Kohl’s Corp. has a problem in women’s.
But Michelle Gass, chief executive officer, said the category is showing momentum online and is primed for a turnaround as Dana Buchman apparel is exited and newer additions, such as Elizabeth and James by Ashley and Mary Kate Olsen, take root.
The women’s business shrunk by 1 percent in the third quarter as all of the retailer’s other categories grew, with particular strength seen in men’s, accessories and footwear.
Kohl’s comparable sales did move back into positive territory with a 0.4 percent gain in the third quarter — after a 2.9 percent comp decrease in the second quarter — but it wasn’t enough for investors or to keep the bottom line from falling.
The retailer’s stock dropped 19.5 percent to $47.01 in trading Tuesday as the firm missed third-quarter expectations and cut its profit outlook for the year, confirming worries of a tough earnings season for traditional retail.
Net earnings fell 24 percent to $123 million, or 78 cents a diluted share. Adjusted earnings per share were lower, at 74 cents a share, and well below the 86 cents analysts projected. Net sales for the three months ended Nov. 2 slipped 0.1 percent to $4.63 billion.
Kohl’s also cut its annual outlook for adjusted EPS of $4.75 to $4.95, down from the prior guidance calling for $5.15 to $5.45.
Gass told analysts on a conference call Tuesday that Kohl’s had a soft September with an increasingly competitive environment and unseasonably warm weather, in addition to significant changes in the store with the launch of new brands.
“Given the heightened competitive environment, we responded by investing in pricing and enhancing our marketing offers, recognizing the importance of entering the holiday season with momentum,” the ceo said, noting the company was now positioned to grab market share.
The result in women’s casual apparel, however, has been “mixed.”
“In the short term, we’ve made a number of moves to position the business for long-term health,” Gass said. “This included exiting the Dana Buchman brand [in apparel] and introducing Nine West and Elizabeth and James. With these introductions, we reflowed the layout of the women’s area in our stores.”
A spokeswoman said Kohl’s decided to “retire” Dana Buchman apparel as of fall, but will continue to sell the brand’s handbags and jewelry.
While the disruption from the brand changes hurt the women’s business in the stores, the category outperformed online.
Gass said there was more work to do in women’s.
“We have a very aggressive and thoughtful strategy, which includes exiting brands that we don’t see as part of our portfolio going forward and introducing relevant brands that will resonate with our core customers as well as drive a new, younger customer and that includes brands like Nine West, of course, Elizabeth and James, the Jason Wu collaboration and there’ll be more to come in the future,” she said.
Meanwhile, the company will continue to keep pushing in other areas of the business that are working, including the active area, the Amazon returns program that drives traffic to the store and the web site.