Kohl’s Beats Expectations as Inventory Levels Improve

Kohl’s Corp. profit topped estimates as inventory levels fell, suggesting the retailer’s efforts to clear excess merchandise are working.

Chief executive officer Tom Kingsbury, who officially started in the role in February, has been managing inventories and cutting costs to bolster performance. Kohl’s also added 200 Sephora shops in its stores in the second quarter, a partnership the company has used to help drive customer traffic.

“Many of our strategic efforts are just underway, which we expect will contribute incrementally in the back half of the year, and even more so in 2024 and beyond,” Kingsbury said in a statement. The company is also expanding its home goods and pet categories, which performed well in the second quarter, Kingsbury said on a call with analysts.

The shares rose 0.2 percent as of 9:52 a.m. in New York.

Adjusted earnings per share of 52 cents in the recent quarter were well above analyst expectations for 23 cents. But comparable sales, a key measure of growth for retailers, fell 5 percent in the period, its sixth consecutive quarterly drop.

“Unfortunately, good operational control provides only the foundation for success,” Neil Saunders, an analyst at GlobalData Plc, wrote in a note. “It needs to be accompanied by a strong sales performance. On this front, we still find Kohl’s wanting.”

Gross margin of 39 percent was in line with the prior period as the retailer took steps to lower merchandise levels. Inventory declined 14 percent in the quarter.

Apparel companies and department stores face looming macroeconomic challenges, including the end of student loan forbearance this fall. That has resulted in cautious outlooks for the full year across a variety of consumer companies. Kohl’s reaffirmed its full-year guidance, which calls for sales to decline as much as 4 percent.

Brands that resonate with consumers have shown resilience. Abercrombie & Fitch Co. and Urban Outfitters Inc. both posted sales growth that exceeded expectations in the most recent quarter.

By Olivia Rockeman

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