Kohl's reports second-quarter sales miss on weak discretionary spending

By Anuja Bharat Mistry and ‌Shania S Thomas

Aug 26 (Reuters) - ​Kohl's ​missed Wall Street estimates for second-quarter sales on Wednesday, as muted consumer spending on discretionary items offset gains from the department chain's turnaround ‌push, sending its shares down about 7% in premarket trading.

U.S. consumer ⁠sentiment deteriorated in August and retail sales fell for the first time in nine months in ‌July, underscoring an increasingly "selective" shopping trend ‌among middle- and lower-income households in the face of stubborn inflation, even as wealthier shoppers remain resilient.

Consumer caution around non-essential purchases has hurt retailers from Kohl's ​to off-price store operators like TJX .

Kohl's also faces strong competition from Ross Stores and e-commerce giant Amazon.com for value-focused shoppers.

Kohl's reported quarterly revenue of $3.32 billion, ⁠compared with analysts' estimate of $3.35 billion, according to data compiled by LSEG.

Its comparable sales fell 0.9% after dropping ​4.2% a year ago.

"The fact that comparable sales remain in decline – the eighteenth consecutive quarter when they have dipped – does not convince ​us that Kohl's is a business in full ‌recovery," said Neil Saunders, managing director of GlobalData.

Kohl's is still losing market share across a lot of its major categories, he ⁠said.

It, however, raised its annual profit forecast after benefiting from $150 million tariff refunds received during the reported quarter and also said it will resume its about $100 million share repurchase program ⁠this year.

The mid-tier retailer has been in the midst of a long-running turnaround aimed at reviving ​demand and lifting margins.

The company's quarterly gross margin grew 305 basis points from last year to 43%, helped by tariff refunds.

Kohl's has also been targeting value-conscious shoppers by investing in its ‌proprietary brands and adding more coupon-eligible labels, among other measures.

The company expects fiscal-year 2026 adjusted earnings of $1.80 to $2.40 per share, above ‌its prior forecast of $1.00 to $1.60 per share.

It expects growth in annual net sales to be ⁠flat to a fall of ‌1.5%, compared with its previous ​range of flat or a 2% decline.

(Reporting by Anuja Bharat Mistry and Shania S Thomas in Bengaluru; Editing by Shinjini Ganguli and ‌Pooja Desai)

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