KSS Stock Falls as Inflation Hits Kohl’s

  • Kohl’s (NYSE:KSS) is the latest retailer to issue a big first-quarter earnings miss, sending its stock down today
  • Poor results from retailers are fueling fears that the U.S. economy may fall into a recession this year
  • On the upside, Kohl’s bad quarter might make it more attractive as the company tries to sell itself
Image of Kohl's (KSS) logo on a Kohl's store
Source: Sundry Photography/Shutterstock.com

Kohl’s (NYSE:KSS) is the latest retailer to announce disappointing earnings, sending KSS stock down today.

Poor results earlier this week from retailers such as Walmart (NYSE:WMT) and Target (NYSE:TGT) helped spark the sharp selloff on Wall Street this week, with the Dow Jones Industrial Average dropping more than 1,000 points yesterday. Now, Kohl’s big first-quarter earnings miss appears to be adding fuel to the fire.

Prior to today, KSS stock had declined 13% year to date.

What Happened With KSS Stock

Kohl’s announced a huge earnings miss for the first quarter and cut its profit and sales outlook for the entire year as inflationary pressures and rising costs hurt its business.

Specifically, the department store operator reported earnings per share (EPS) of just 11 cents compared to 70 cents expected On Wall Street. Revenues in the quarter totaled $3.72 billion versus forecasts for $3.68 billion. Kohl’s said its comparable sales fell 5.2%, which was much worse than the 0.5% increase that analysts anticipated.

The poor earnings come while Kohl’s is in the process of selling itself. Kohl’s has been facing pressure to find a buyer for its business ever since activist hedge fund Macellum Advisors pushed for the company to do so in January of this year, arguing that management has failed to grow sales.

Kohl’s did say in releasing its Q1 print that it expects to receive final and fully financed bids from potential buyers in the coming weeks, providing a potential silver lining.

Why It Matters

The terrible showing by Kohl’s and other retailers this week is heightening fears that the U.S. economy will be pushed into recession this year as the Federal Reserve raises interest rates to tame inflation.

Stocks had their worst one-day drop in two years yesterday after Target followed Walmart and issued earnings that missed the mark by a wide margin. Kohl’s and other retailers say they are not able to manage costs that have spiked dramatically higher in recent months, and that high prices for oil and gas, as well as ongoing supply chain problems, are hurting their bottom lines.

Kohl’s dismal Q1 results play into the narrative that retailers are losing their pricing power, or the ability to raise prices without losing customers, as inflation continues to run hot. Worries that U.S. consumers might scale back their spending this year with interest rates on the rise is causing panic in some corners of the stock market, leading to the big selloff that began in early April.

What’s Next for Kohl’s

Kohl’s stock takes a hit today on news of its bad Q1 results. However, management appears to be preoccupied with finding a buyer, a process that may become easier and more enticing now as the company is likely to look a lot cheaper to potential suitors.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

Article printed from InvestorPlace Media, https://investorplace.com/2022/05/kss-stock-falls-as-inflation-hits-kohls/.

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