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Why Kohl's Stock Was Falling Today

Jeremy Bowman, The Motley Fool

What happened

Shares of Kohl's (NYSE: KSS) were taking a dive today after the department store chain issued a disappointing earnings report in its first quarter and cut its guidance for the rest of the year. As a result, the stock was down 11.3% as of 11:19 a.m. EDT.

So what 

Kohl's said comparable-store sales in the quarter fell 3.4%, breaking a streak of several quarters of comps growth. That led to net sales also falling 3.4% to $3.82 billion, missing estimates at $3.95 billion. Overall revenue was down 2.9% to $4.09 billion. Other revenue of $266 million, which includes credit card revenue, third-party advertising on its website, and other non-merchandise income, made up the difference.

The entrance to a Kohl's store

Image source: Kohl's.

Gross margin was essentially flat in the quarter, falling 6 basis points to 36.8%, and selling, general, and administrative expenses rose 1.2% to $1.28 billion, or 130 basis points as a percentage of revenue to 31.2%, as the company lost leverage from the comps decline. 

Adjusted earnings per share declined from $0.64 a year ago to $0.61, falling short of expectations at $0.67.

CEO Michelle Gass acknowledged the company's struggles in the quarter, saying, "The year has started off slower than we'd like, with our first-quarter sales coming in below our expectations," and, "While we are planning the year more conservatively, we continue to invest in our business and operate with a view on our long-term success."

Gass also touted the plan to accept Amazon returns at all of its stores.

Now what 

Making matters worse, the company significantly slashed its earnings guidance for the year, calling for adjusted EPS of $5.15 to $5.45, down from a previous forecast of $5.80 to $6.15. Such a cut indicates that the company's expectations for the year have changed significantly, as it now sees adjusted EPS falling from last year's mark of $5.60 instead of increasing.

Kohl's had been a bright spot among department stores and retailers since it had been able to deliver steady comps growth in recent years. But today's report shows that industry headwinds remain challenging and Kohl's will have to keep adjusting in order to succeed. Given the guidance cut, it's not surprising to see the stock falling by double digits today.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.