Kohl’s Slides Amid Broader Sector Decline After Reporting Weak Q1 Sales

Shares of Kohl’s (KSS) slipped after the company reported weaker-than-expected sales for the first quarter, joining many sector peers in reporting downbeat results amid a particularly challenging retail environment.

WHAT’S NEW: Before the market open, Kohl’s reported adjusted earnings per share for Q1 of 31c on revenue of $3.97B, falling short of analysts’ consensus estimates of 37c and $4.13B, respectively. Same-store sales for the quarter fell 3.9% year over year, the company said. Kohl’s chairman, president, and chief executive officer Kevin Mansell called Q1 sales “challenging” but that the company was able to manage its gross margin and inventory levels consistent with expectations as it took the “markdowns necessary to clear excess inventory.” The company added on its Q1 earnings conference call that the quarter started out “strong” in February, but the company had a softer-than-expected pre-Easter and further deterioration in April. While Kohl’s “feels good” that sales trends will improve in Q2 and in the second half of the fiscal year, it noted that it was “hard to gauge” how much of the sales shortfall in Q1 was related to macro issues and how much was related to company-specific issues.

WHAT’S NOTABLE: Rival retailers have not fared much better than Kohl’s recently. Yesterday, Macy’s (M) reported Q1 sales that missed analyst estimates and same-store sales on an owned plus licensed basis that fell 5.6%. The retail giant also lowered its fiscal 2016 EPS and SSS guidance. Earlier this week, Gap (GPS) reported its fifth consecutive months of sales declines and provided guidance for Q1 EPS below analysts’ expectations. Nordstrom (JWN), which will report quarterly results after the market close today, was downgraded to Underperform from Peer Perform at Wolfe Research on Tuesday, and Ross Stores (ROST), which reports Q1 earnings Thursday, May 19, was downgraded to Underweight at Piper Jaffray yesterday. In addition, the New York Post reported last week that J.C. Penney (JCP), which is set to report quarterly results before the market open on Friday, had taken emergency cost-reduction measures in April in an effort to maintain its bottom line.