Kohl’s (KSS) investors got a positive surprise as the struggling department store chain reported an unexpected quarterly profit.
The retailer posted first-quarter earnings per share (EPS) of 13 cents, whereas analysts had anticipated a loss of 42 cents. Revenue fell 3.3% to $3.36 billion, which was slightly above forecasts. Comparable store sales were down 4.3%, also a bit better than estimates.
CEO Tom Kingsbury credited the results to a 6% reduction in inventory, improvements in store productivity, and continued sales momentum at its Sephora shops inside Kohl’s locations. He said the gains "represented a first step as we work to drive sales and earnings performance in the long-term."
Kingsbury officially took over as CEO in February 2023 and introduced a turnaround plan for the company, which had been plagued by declining sales and sinking share prices. Kohl’s had been under pressure from activist investors Ancora Holdings and Macellum Capital to boost the retailer’s fortunes, including calling for the ouster of Kingsbury’s predecessor, Michelle Gass. She left in December 2022 to lead Levi Strauss (LEVI). The retailer also held discussions last year with Vitamin Shoppe owner Franchise Group (FRG) about selling the firm, but eventually ended the bid.
Kingsbury added that "there is still work to be done," and the macro environment "remains challenging." He explained that’s why Kohl’s is reaffirming its full-year guidance of sales down 2% to 4%, with EPS in the range of $2.10 to $2.70.
Kohl’s shares were up 6% as of 2:30 p.m. Eastern Time Wednesday. However, they’ve lost 46% of their value over the past year, far underperforming the broader consumer discretionary sector, which is up 7% over the same period.