By Savyata Mishra
(Reuters) - Kohl's Corp on Wednesday reported a surprise profit as the department store operator's efforts to reduce excess inventory and slash costs under a newly appointed CEO started paying off, sending its shares up 18%.
The company also maintained its full-year targets even as it posted a bigger-than-expected drop in quarterly comparable store sales.
Kohl's is attempting a turnaround under CEO Tom Kingsbury who took the helm in February. Its efforts to reduce reliance on margin-sapping discounts to cut inventory and focus on in-demand categories including work wear are already showing results.
First-quarter operating expenses fell 4.2% to $1.2 billion, while gross margin grew by 67 basis points, as the company's inventory fell by 6%.
Earnings per share came in at 13 cents, compared with analysts' average expectation of a loss of 42 cents, according to Refinitiv IBES data.
Fitch analyst David Silverman said the quarter was "a step in the right direction for Kohl's to position 2023 as a year of operating income and cash flow growth against a challenging 2022."
For full-year 2023, Kohl's maintained its forecast for earnings per share in the range of $2.10 to $2.70, and a 2% to 4% dip in net sales.
Several U.S. retailers are facing slowing demand as inflation-hit customers curb spending on non-essential items. Target and home improvement chain Home Depot have taken a conservative approach in their annual forecasts.
"The U.S. consumer is definitely showing signs of cracking when you look at durable goods," said CFRA Research analyst Zachary Warring, adding the retailers' outlook has been extremely gloomy.
The challenging retail environment also drove a 4.3% decline in Kohl's first-quarter comparable sales, compared with analysts' average estimate of a 3.9% fall.
Last year, Kohl's shares had lost half their value as the company faced shareholder unrest due to disappointing sales and failed negotiations for a sale of its business.
(Reporting by Savyata Mishra in Bengaluru; Editing by Shinjini Ganguli)
Kohl's posts surprise profit as cost cuts pay off, shares jump - Yahoo Finance
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