Kohl's posts declines in 2Q profits and sales, joining other stores facing cautious spending

NEW YORK (AP) — Kohl's reported on Wednesday that profits dropped nearly 60% on weak sales in the second quarter, joining a slew of retailers that are wrestling with shoppers' cautious spending in a challenging economy.

But Kohl's results beat Wall Street expectations as the retailer cut inventory and expenses. The department store chain also reaffirmed its annual guidance. Shares rose nearly 4% in mid-day trading.

Kohl's, based in Menomonee Falls, Wisconsin, is among the last group of retailers to report second-quarter results in an earnings season that has shown how still-high inflation, despite some easing, and higher interest rates are making shoppers cut back on discretionary items like clothing in order to afford their larger grocery bills.

It's a worrying sign as retailers head to the critical back half of the year, including the holiday shopping season.

Foot Locker said Wednesday it was cutting its full-year outlook again and pausing its quarterly dividend as sales dropped in its fiscal second quarter with consumers continuing to be more cautious about their purchases.

On Tuesday, Macy's said it was forced to discount its spring goods to make room for fall and holiday merchandise in the face of customers’ cautious spending. But the retailer’s adjusted second-quarter profits and sales still topped Wall Street expectations.

Nordstrom is slated to report its second-quarter results on Thursday.

Kohl's earned $58 million, or 52 cents per share, for the quarter ended July 29. That compares with $143 million, or $1.11 per share, in the year-ago period.

The company said it cut inventory by 14% compared with the year-ago period.

Total revenue fell to $3.9 billion in the quarter from $4.09 billion in the year-ago period.

Analysts were expecting 23 cents per share on revenue of $3.76 billion, according to FactSet analysts.

Comparable sales — those coming from stores and digital channels opened at least a year — fell 5%.

A bright spot for Kohl's is its partnership with beauty chain Sephora, which will be featured in more than 900 stores by the end of this year.

Tom Kingsbury, who became Kohl's permanent CEO in February, noted that Sephora at Kohl's continues to resonate with existing customers while also bringing in new customers who are shopping more frequently.

“The performance is exceeding our expectations and we are driving considerable beauty share gains,” he said.

Shares rose $1.01 to $26.74 in early afternoon trading on Wednesday.