Kohl’s Corp. shares surged after it offered a more optimistic full-year sales outlook, the latest indication that consumer spending hasn’t yet run out of steam.
The company now expects comparable sales to fall no more than 5 percent this year, an improvement from its prior forecast that sales would decline as much as 6 percent. The company also reported second-quarter sales that were better than Wall Street estimates.
Retailers continue to point to sales momentum from US shoppers shrugging off worries about tariffs and and inflation. Earlier this month, T.J. Maxx owner TJX Cos. and Ross Stores Inc. indicated that Americans are willing to spend, but are looking for cheaper options.
The momentum cuts against signs that Americans continue to worry about the economy. A measure of consumer confidence fell in August on growing concerns about the job market. Unemployment and limited salary increases are contributing to consumer sentiment hovering at levels well below those seen prior to the pandemic.
Abercrombie & Fitch Co. also upped its sales forecast on strong back-to-school demand. Foot Locker Inc., which is being acquired by Dick’s Sporting Goods Inc., reported a 1.4 percent gain in North America comparable sales in the most recent quarter. The footwear chain’s European and Asia Pacific businesses, meanwhile, saw a 10 percent drop in sales.
Kohl’s also saw strong performance from back-to-school categories including backpacks, kids footwear and fleece, interim chief executive officer Michael Bender said on a call with analysts.
The retailer’s latest results suggest that recent moves, such as focusing on fine jewellery and improving its womenswear selection, are helping win back consumers. The company has looked to tie-ups with partners such as Sephora and the Babies “R” Us brand to help drive spending and shopper traffic.
Kohl’s has also expanded the number of brands eligible for coupons, a move that has helped improve sales as lower- and middle-income shoppers prioritise value.
The chain’s “initiatives are beginning to resonate with our customers,” Bender said in a statement.
Shares of the Menomonee Falls, Wisconsin-based company jumped as much as 29 percent in New York trading. The stock had declined 7.1 percent this year through Tuesday’s close.
Kohl’s is looking to reverse 14 straight quarters of declining revenue amid intense competition for retail dollars and upheaval in its corporate ranks. Kohl’s is looking for a new CEO after firing the previous CEO for directing millions of dollars to a romantic partner. Prior to that move, the retailer cut 10 percent of corporate jobs.
Bloomberg News reported on Tuesday that Kohl’s has asked some vendors for more time to settle invoices. Retailers will typically seek longer payment terms to manage working capital swings and conserve cash.
Bender took over when the retailer announced on May 1 the termination of CEO Ashley Buchanan.
According to a company filing, Buchanan directed Kohl’s to conduct business with a vendor founded by someone with whom he has had a relationship — the nature of which was romantic, Bloomberg previously reported. He caused the retailer to enter a multimillion-dollar consulting agreement where “the same individual was a part of the consulting team,” the filing said.
Kohl’s has more than $2 billion of debt, including the recent issuance of $360 million of junk bonds in which proceeds were earmarked to meet obligations coming due this year.
By Lily Meier