Kohl's signals slow start to second half on weak back-to-school sales, shares drop

Reuters

Published Aug 18, 2020 07:30AM ET

Updated Aug 18, 2020 01:35PM ET

(Reuters) - Kohl's Corp (N:KSS) signaled a slow start to the current quarter on Tuesday, as the department store chain discounts heavily and grapples with weak demand as fewer schools reopen due to the COVID-19 pandemic, sending its shares down nearly 16%.

Kohl's executives also said they would take a conservative approach to the second half of 2020, as the company prepares for further markdowns and discounts ahead of the all-important holiday season.

"Back-to-school season has been impacted by the crisis as families navigate how their kids will return to school this year," Chief Executive Officer Michelle Gass said on the earnings call.

Retail giant Walmart Inc (N:WMT) also said back-to-school season has been "choppy", as more school districts rolled back their reopening plans.

U.S. department stores, which had been struggling to boost sales even before the pandemic, have had to sell products at lower prices and invest in their online businesses to keep pace with online-centric, off-price, and deeper-pocketed big-box retailers.

The Menomonee Falls, Wisconsin-based company's online sales increased 58% in the quarter, as it introduced curbside pick-up option, but the jump hurt its margins due to higher-than-expected shipping charges.

Walmart also posted its biggest-ever growth in online sales as shoppers cashed-in stimulus checks and ordered everything from electronics and toys to groceries online.

Kohl's net sales declined 23% to $3.21 billion but beat estimates of $3.09 billion, helped by strong demand for kitchen electrics, toys, cookware and bedding.

Excluding items, the company lost 25 cents per share in the second quarter ended Aug. 1, smaller than estimates of an 83 cent loss, according to IBES data from Refinitiv.

Shares of the company have more than halved in value this year.