Kohl's Corp. first-quarter sales decline 5.2% as the retailer looks at potential buyers

Kohl's Corp., which has about 1,100 stores nationwide, on Thursday reported first-quarter results "below expectations." 

The company's first-quarter net sales and comparable sales saw a decrease of 5.2%. It reported net income of $14 million, or 11 cents per share, compared with $14 million, or 9 cents per share, a year earlier. But, CNBC said, that was short of analysts’ expectations of 70 cents a share.

The report comes a day after Target announced much weaker than expected earnings last quarter. Target stock shed nearly a quarter of its value in just one day, its biggest one-day decline since Black Monday in 1987.

Kohl's CEO Michelle Gass said the decline was mostly driven by a decrease in sales in the home and children's departments.

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Cool spring chills Kohl's sales

“The overall industry was up against very difficult year-over-year comparisons in the first quarter, including our home business, up more than 30% last year,” Gass said. “Our home sales declined 17% in the quarter and accounted for 15% of our sales.” 

Spring seasonal business was under pressure in the quarter due to “unseasonably cooler weather” especially in northern markets, Gass said. 

“Children's business, which is heavily influenced by weather, saw a 12% decrease in sales, with spring seasonal sales accounting for more than half of the decline,” she said.

The announcement of the lackluster performance comes after Kohl's on Wednesday announced that two key executives were leaving the retailer.

"As we continue to drive our strategy forward we will use this opportunity to identify new talented leaders to enhance our capabilities and accelerate our transformation," Gass said. "Search firms are already engaged and the search is underway." 

Kohl's is looking at potential buyers

The results come a week after the company fended off an effort by activist investors to take over the board of directors. Kohl's is evaluating numerous offers to buy the company.

Gass said interested parties were “working to prepare fully financed proposals.” 

“At this point, we have formally communicated to the multiple parties in our process, the specific procedures for the submission of actionable bids due in the coming weeks,” Gass said.  

At midday, Kohl's shares were trading at $44.56, up about 3% in heavy trading. Kohl's shares, along with those of other retailers and the overall market, were hammered Wednesday in a strong sell-off triggered by weak earnings reports from Target and Walmart.

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Sephora partnership said to be on track

As the company dives deeper into its partnership with Sephora, Gass said the Sephora at Kohl's stores have seen an net increase in the low single digits in sales. 

“We’ve said all along that the true incremental benefit from Sephora will occur over multiple periods as awareness and replenishment traffic builds,” Gass said. “The Sephora performance during the first quarter indicates that this in fact is taking hold and it gives us great confidence as we roll out another 400 Sephora at Kohl’s shops by early August.”  

Gass said the company expected more positive results from its partnership with Sephora toward the end of the year.