Mid-tier U.S. department store operator Kohl’s Corporation (KSS) posted financial results for the first quarter of fiscal 2015 that missed analyst sales expectations, sending the stock plummeting on the first day of trading following the release.
The retailer announced that for the three months ended May 2, sales increased by 1.3% to $4.12 billion, missing consensus estimates of $4.19 billion.
Comparable store sales, which include e-commerce sales, were up by 1.4%, compared to a 3.4% decline in the prior year period, missing Wall Street estimates of a 2.5% increase. The comp reflects a 2.7% increase in average unit retail, but units per transaction fell by 1.3%. Number of transactions were flat in the period.
Footwear and men’s reported above-average increases, while children’s was consistent with the company average. The accessories category was flat compared to last year.
Although women’s was slightly negative overall, the company reported that the core women’s business, which includes Misses, Plus Size and Intimates, outpaced the overall store comp for the first time in many quarters. The junior business, on the other hand, underperformed the overall comp, hurt by merchandising missteps, which dragged down the overall women’s business.
Denim also saw a pickup in the quarter, which may be a good sign for the upcoming back-to-school season, while active continues to be strong.
Gross margin in the quarter increased by 17 basis points to 36.9% of net sales.
Net income was $127 million, compared to $125 million last year. Earnings per share rose 5 percent to $0.63 from $0.60 in the prior year period, beating consensus estimates of $0.56 per share.
“Sales were modestly below our original expectations for the quarter, but accelerated in the March/April combined period after a weak February. We are very pleased with our earnings results, with a more balanced promotional calendar driving merchandise margin combined with strong expense control,” chairman, president and CEO Kevin Mansell said in a statement.
The company has been implementing its “Greatness Agenda” turnaround plan based on five key initiatives or pillars: amazing product, easy experience, personalized connections, incredible savings and winning teams.
Mansell told analysts on the quarter earnings conference call that this year, the company is focusing on key entertainment brands and properties including Cinderella, Marvel and Disney. It also plans to be the family destination for all things Star Wars, and will offer sports products featuring NFL, NCAA and MLB logos in team shops.
Another one of the company’s goals for this year is to lead in the active category and become a destination for the wellness lifestyle. Key active and wellness initiatives include expanding Nike offerings, new and expanded brand launches including Bliss in beauty, Gaiam yoga apparel and Champion and PUMA. In the first quarter, Kohl’s continued to launch new wearables that focus on wellness activities and sleep.
In the outdoor category, Kohl’s is planning a major relaunch of the Columbia brand this fall.
The company’s stock, which reached a high of $79 in March, plunged 13 percent Thursday, its biggest one-day loss in years, all but erasing its year-to-date gains.