Nation's Largest Retailer Presents Bearish Outlook For 2022, Cites Inflation

Kevin Alexander

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A Kohls Storefront earlier this year. On Thursday, the retailer said it expects lower sales & profits for 2022.Shutterstock

On Thursday, retailer Kohls presented a downbeat forecast for 2022, saying that it expects sales to be down 5-6% year over year. The company cited inflation and specifically noted it was preventing its middle-class customers from spending at its stores.

"(Our results) reflect a middle-income customer that has become more cost-conscious... we are seeing customers make fewer shopping trips, spend less per transaction and shift towards... private brands," Chief Executive Michelle Gass said.

The company also reported lower sales and profits for the 3rd quarter, ending July 30th.

Shares in Kohls (KSS.N) were down almost 5% in trading mid-day Friday.

Stores have also been weighed down with excess inventory, as consumer buying habits have again shifted since the pandemic. Kohls' inventory was 48% larger at the end of the 3rd quarter than last year at the same time.

The firm is testing several ideas to lure customers back into opening their wallets. The company recently partnered with Sephora to open small outlets within selected stores. That alone has brought in over a million customers who tend to be younger, spend more, and shop more frequently. The company is also rolling out self-checkout at every location for online orders in the coming weeks.

But it may not be enough to overcome the brand's disjointed merchandising strategy.

In a statement, Neil Saunders Managing Director at GlobalData, stated:

"The company has lost the plot in terms of merchandising and appears to be taking a seemingly random approach to buying... quite simply, Kohl's is headed rapidly in the wrong direction...It used to be the case that while a little uninspiring, Kohl’s was disciplined and neat in its presentation. Over the past year, that has all gone out of the window...In this kind of economic environment, consumers will quickly abandon purchases and stores that require too much effort for too little reward.”

With more than 1,100 US stores and around $19 billion in annual sales, Kohl’s is the largest department store chain in the United States.

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