Kohl's train-wreck of a 2022 is rolling right along, and a top institutional shareholder in the retailer tells Yahoo Finance that it all points back to a poor job by execs in the C-suite and those hanging out on the company's board yearning to collect checks.
"It's hard to imagine how inept they are," the shareholder said of current management.
The frumpy mid-tier department store issued a shocking earnings warning on Thursday in the wake of another dismal quarter execs failed to guide the Street on — to wit, no full year earnings guidance was shared by Kohl's in its last financial press release on July 1. Kohl's said it now sees full year earnings in a range of $2.80 to $3.20 a share, down sharply from a prior forecast of $6.45 to $6.85.
Second quarter same-store sales tanked 7.7% as middle-income consumers pulled back on discretionary purchases with inflation raging. Gross profit margins plunged 290 basis points from a year ago. Inventory ballooned 48% from a year ago.
The quarter and outlook were so bad, Kohl's trademark super optimism was toned down a touch on an earnings call with analysts.
"Our second quarter results reflect a middle-income customer that has become more cost conscious and is feeling greater pressure on their budgets. Therefore, we are seeing customers make fewer shopping trips, spend less per transaction and shift towards our value oriented private brands. We have responded to this dynamic environment, taking action to adjust our plans and adapt to a softer demand outlook. We've increased promotions. We are being aggressive on clearing excess inventory. We are pulling back on receipts and we are managing expenses diligently. We acknowledge that many others are taking similar actions, which will likely make for a more promotional environment in the near term," Kohl's embattled CEO Michelle Gass said on the call.
Shares of Kohl's fell 7.7% to $31.32 on the session.
The other apparent aspect of Kohl's disaster of a 2022 is what insiders say was a horribly run process to sell the company on the part of the board led by chair Peter Boneparth.
Consider this: Activist Engine Capital pushed Kohl's to sell itself in December 2021 when the stock was $48 or so. Throughout the first quarter of this year, Kohl's explored a sale that sources say saw offers coming in around $60 a share.
Those same sources say Kohl's dragged its feet on the sale process, only to hold an investor day in March that was light on turnaround details and high on that trademark hype. By April, Kohl's entered a three week exclusivity deal with Franchise Group, which offered to buy the company for $60 a share.
Come mid-May, Kohl's announced a stinker of a first quarter that hammered the stock. Franchise Group's interest in completing a deal vanished. By July 1, Kohl's said it was ending its strategic review process without a deal with Franchise Group or anyone else. The company cited a poor financing market.
And so Kohl's stock, which hit a high of $63.71 on Jan. 24 amid the heightened deal speculation, is now less half of that after absorbing two dreadful quarters and a failed sale process.
At this point, the disastrous course of events could eventually lead to the exit of CEO Michelle Gass.
"It's shocking she is still CEO," the source said.
Yahoo Finance Live invited Kohl's CEO Michelle Gass on — her comms team didn't return the email on our request.