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)
