For years, we've been hearing about the downfall of the shopping mall, which seems to be disappearing in the digital age. But some mall staples—like Abercrombie, Gap, and American Eagle—have recently avoided the fate they seemed destined for, reporting record sales in 2024. Of course, this isn't true for all of the well-known mall retailers. New data shows that shoppers are still abandoning Kohl's, which just saw yet another drop in sales.
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In a May 30 press release, Kohl's reported a 5.3 percent drop in net sales and a 4.4 percent drop in comparable (same-store) sales during the first quarter of 2024. The retailer also reported a $27 million net loss ($0.24 loss per share).
According to CNBC, Kohl's shares plummeted by 20 percent as a result, marking the stock's biggest single-day percentage drop ever. Kohl's lowered its fiscal forecast for the year as well. The retailer now predicts a 2 to 4 percent decrease in net sales, as opposed to somewhere between a 1 percent drop and a 1 percent rise, Reuters reported.
“Our first quarter results did not meet our expectations and are not reflective of the direction we are heading with our strategic initiatives," Kohl's CEO Tom Kingsbury said in the press release.
During a May 30 post-earnings call, Kingsbury noted that Kohl's had "elevated clearance activity" during the same time in 2023, which made for a tough comparison. He also pointed to the pressure middle-income customers are facing with high interest rates and inflation.
"While spending among our high-income customers has remained steady, our middle-income customer continues to be impacted," Kingsbury told investors. "In this environment, we are working hard to deliver even more value, recognizing that the discretionary spend of our customers is pressured."
Speaking with CNBC, Kingsbury said that poor weather during the last five weeks of the first quarter negatively impacted sales, too. As a result, customers weren't spending on seasonal merchandise or spring clothing.
"Fortunately, we see it coming back as the weather improves," the CEO said.
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But while Kingsbury is optimistic, Kohl's sales have been down for quite some time. As Neil Saunders of research firm GlobalData told The Wall Street Journal, sales have fallen by 16.8 percent since 2019. Saunders estimates that Kohl's lost roughly 1.5 million customers in the same timeframe.
Per Saunders' explanation, Kohl's isn't making enough money to cover the interest payment on its debt. This means there's also less money to upgrade stores.
But it's not for lack of trying. Kohl's is actively trying to recoup sales through its introduction of in-store Sephora and Babies R Us shops, along with other initiatives. For the time being, experts say this strategy isn't proving effective.
"Kohl's has been too reliant on other brands such as Sephora, Amazon, and now Babies R Us to drive traffic rather than distinguishing its core brand identity," Emarketer senior analyst Zak Stambor told Reuters. Shoppers are more willing to spend at a store like Abercrombie, where they can purchase on-trend and well-made clothing, Stambor said.
Still, Kohl's did note some positives from the first quarter, including progress in the women's category and "continued strong growth in Sephora," Kingsbury said in the press release. The retailer also successfully got inventory down by 13 percent, the CEO pointed out.
