By Savyata Mishra
(Reuters) -Kohl's on Tuesday forecast a bigger drop in annual sales than previously expected, a sign the department-store chain is struggling to draw in shoppers as it navigates a CEO change ahead of a deal-heavy holiday shopping season.
Shares of the Menomonee Falls, Wisconsin-based company fell 20% in early trading, as it also reported worse-than-feared third-quarter results.
"Our results did not meet expectations and we're frankly disappointed sales have been a challenge for us throughout 2024 and weakened further in the quarter," outgoing CEO Tom Kingsbury said in a post-earnings call.
The weak forecast underscores an uncertain holiday season for the retail sector, which could lean in favor of competitors such as Walmart (NYSE:WMT) and Amazon.com (NASDAQ:AMZN), as customers turn increasingly bargain-focused.
Retailers have launched early and steep discounts to entice consumer spending in the critical holiday season, owing to five fewer days between Thanksgiving and Christmas.
Kohl's (NYSE:KSS), whose stock has declined 36% in value this year, announced Kingsbury's exit as CEO a day earlier. He will be succeeded by Ashley Buchanan, retail veteran and Michaels Companies (NASDAQ:MIK)' chief, in January.
As part of its turnaround efforts under the outgoing CEO, Kohl's has invested in expanding its gifting categories and bringing in new brands such as baby gear retailer Babies "R" Us to offer trendier products.
However, those investments led to lower availability of private apparel brands, especially in the women's business, weighing on sales, Kingsbury said.
"We simply must do a better job of balancing these initiatives while managing the core business," Kingsbury said.
Department-store operators such as Kohl's and Macy's (NYSE:M), which have struggled for years, are unlikely to have a strong holiday season, Morningstar analyst David Swartz said.
Kohl's comparable sales dropped 9.3% for the quarter ended Nov. 2, its eleventh consecutive quarter of decline. Analysts on average had expected a 5.1% fall, according to data compiled by LSEG.
It earned 20 cents per share, missing an estimate of 28 cents.
The company now expects full-year net sales in the range of a 7% to 8% decline, compared to its prior forecast of a drop between 4% and 6%.