Kohl’s Rises on Profit Beat as CEO’s Fixes Start to Pay Off

Kohl’s Corp. soared after it reported a surprise profit and reduced its stockpile of merchandise in the first quarter — early signs that the new chief executive officer is bolstering performance.

Chief executive officer Tom Kingsbury, who assumed the role in February, said in a statement that Kohl’s is “making progress against each of our key 2023 priorities.” He pointed to inventory management and expense discipline.

The shares rose as much as 19 percent on Wednesday in New York trading, the most in four months. Through Tuesday’s close, the stock had dropped 24 percent in 2023.

Earnings per share of 13 cents in the quarter ended April 29 beat analyst expectations for a 40-cent-per-share loss. Gross margin of 39 percent in the first quarter surpassed estimates of 36.9 percent. Inventories, meanwhile, declined 6 percent, reversing the 4 percent growth in the previous quarter.

Walmart Inc., Target Corp. and Home Depot Inc. have pointed to weaker consumer spending in the first three months of the year — particularly in discretionary categories such as apparel and home goods. Those are key areas for Kohl’s, and a decline in same-store sales in the first quarter showed its also being hit by that trend.

Comparable sales fell 4.3 percent, deeper than the 3.9 percent average decline expected by analysts. It’s the fifth consecutive same-store sales drop for Kohl’s, showing the retailer still has work to do to win back shoppers.

Investors, however, appear to look past the macroeconomic weakness and focus on management’s steps to stabilise the business after a buildup of inventory had forced Kohl’s into margin-busting markdowns in previous quarters.

“Having a disciplined approach to inventory is key for many reasons,” Kingsbury said on a call with analysts. “We are happy with the progress we’ve made from January to now, and we could be better than that by the end of the second quarter.”

By Olivia Rockeman

Learn more:

Why Activist Investors Are Targeting Department Stores

Hedge funds are urging Kohl’s and Macy’s to consider radical changes to how they operate as the retailers struggle to reverse decades of decline.