Menomonee Falls-based Kohl’s Corp. today reported an 87 percent reduction in first quarter profit, citing its ongoing store closures and corporate restructuring expenses, as well as a consumer shift away from retail spending.
First-quarter net income was $17 million, or 9 cents per diluted share, down 87 percent from $127 million, or 63 cents per share, in the first quarter of 2015.
Operating income was $106 million, down from $280 million in the same period last year. The company recorded $64 million in impairments, store closings and other costs during the quarter, compared to $0 in the first quarter of 2015. The costs related to 18 store closures and associated employee severance costs that are part of a corporate restructuring Kohl’s announced in February. The company expects another $105 to $110 million in costs as part of the restructuring in the second quarter.
Comparable store sales, an important measure of retail performance, were down 3.9 percent in the first quarter. In the first quarter of 2015, comparable store sales were up 1.4 percent.
Total revenue was $4 billion in the first quarter, down from $4.1 billion in the same period a year ago.
In a response to a question in its earnings call about the rising minimum wage, lower gas prices and fairly positive unemployment numbers, and the resulting discretionary spending ability among consumers, chief financial officer Wes McDonald said, “They’re not buying apparel. They’re spending money on restaurants and experiences and until we get some more excitement in apparel, it’s going to remain, in my opinion, a replenishment market.”
“There seems to be some changes in consumer behavior in terms of traffic coming into our stores,” Mansell said. “It’s hard to gauge how much of the sales’ sharp fall is related to macroeconomic factors, and how much is related to company specific factors.”
One bright spot, company leaders said, were companywide efforts to reduce expenses and inventory to make up for the challenging retail environment.
Kohl’s is among several major national retailers that have reported poor performance in recent quarters. Macy’s, which yesterday reported first quarter profit dropped 40 percent, also pointed to soft consumer spending. The Bon-Ton Stores Inc., which has dual headquarters in Milwaukee and York, Pa. and operates Boston Store, will report its earnings on May 19.
Kohl’s has 1,167 stores in 49 states, up from 1,164 stores a year ago.