Tags: Kohls | Profit | Sales | retail

Kohl's Profit Drops 23% Amid Gloomy Sales Forecast

Thursday, 10 May 2012 11:43 AM

Mid-tier department store chain Kohl's Corp. reported a 23 percent drop in first-quarter profit as its gross margin was hit by price cuts designed to lure back shoppers.

The retailer, which competes most directly with Macy's and J.C. Penney Co. Inc., also forecast another quarter of tepid sales growth, projecting same-store sales would be flat to up 1 percent in the current quarter. That would follow a 0.2 percent rise in the first quarter.

Kohl's, which struggled during the holiday season after pricing too aggressively for its price-sensitive clientele, ended up lowering prices this spring.

That led to "significantly lower gross margins," Chief Executive Kevin Mansell said in a statement.

Gross margin, which gauges how profitable sales are, fell 2.2 percentage points to 35.9 percent of sales.

Kohl's, which operates 1,134 stores, projected second-quarter earnings of 96 cents to $1.02 per share, below the $1.13 Wall Street analysts had been expecting, according to Thomson Reuters I/B/E/S.

The retailer left unchanged its forecast for earnings of $4.75 per share for the full year ending in January 2013.

Kohl's posted first-quarter profit of $154 million, or 63 cents per share, down from $201 million, or 69 cents per share, a year earlier.

That was 2 cents better than analysts expected, thanks to cost-cutting.

Kohl's was unable to capitalize on the opening Penney left when it started in February to implement a new pricing strategy that largely gets rid of sales events. Analysts have said such changes will hurt Penney, at least initially.

© 2017 Thomson/Reuters. All rights reserved.

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