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 5% before the bell.
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.
This cautious consumer behavior when spending on nice-to-have items, including apparel and home goods, has been weighing on businesses, from high-end store owners such as Kohl's to off-price retailers like TJX.
Kohl's has also been contending with stiff competition from off-price retailers such as Ross Stores and e-commerce giant Amazon.com, which have managed to attract bargain-hungry customers.
The company's quarterly revenue fell 0.9% to $3.32 billion from a year ago, compared with analysts' estimates of about a 0.1% decline to $3.35 billion, according to data compiled by LSEG.
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.
Quarterly gross margin of Kohl's 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 2026 adjusted earnings of $1.80 to $2.40 per share, above its prior forecast of $1.00 to $1.60.
It expects growth in its annual net sales to be flat to a fall of 1.5% compared with its previous range of flat or a decline 2%.
(Reporting by Anuja Bharat Mistry and Shania S Thomas in Bengaluru; Editing by Shinjini Ganguli)
