(Reuters) - U.S. department store operator Kohl’s Corp (KSS.N) warned that sales could fall this year and said it was unlikely to meet its 2017 target of $21 billion in sales because of a weak economy and a pullback in consumer spending on its core categories such as apparel.
Shares of the company, which plans to close 18 underperforming stores this year, were down about 1.9 percent at $44.60 on Thursday.
Kohl’s forecast full-year sales to fall or grow by only up to 0.5 percent.
Department store operators, including Kohl’s and Macy‘s, have reported weak sales for most of last year, hurt by falling spending in categories such as apparel, unseasonably warm weather in the second half of 2015 and growing competition from online rivals such as Amazon.com Inc (AMZN.O).
“While the growth backdrop clearly remains challenging for the department store sector, we believe more aggressive actions to trim costs and rationalize the store base will protect free cash flow” Baird Equity Research analyst Mark Altschwager wrote in a note.
Kohl‘s, whose fourth-quarter sales were hurt by unseasonably warm weather in November and December, also forecast full-year earnings largely below analysts’ average estimate.
“The big issue in the fourth quarter was the first three weeks of November...it was very difficult to sell any cold weather apparel and that’s where the big drop versus our plan was,” Kohl’s Chief Executive Kevin Mansell said on a conference call.
Kohl‘s, which is known to be the most weather-sensitive among department store operators, also said winter storm Jonas in January was a $20 million hit to sales.
Rival Macy’s Inc’s (M.N) quarterly sales fell less than expected, and the retailer said it was helped by a last-minute blast of cold weather in January.
Kohl’s inflated inventory levels - up 5 percent per square foot - may result in some margin pressure in the first quarter, Stifel Nicolaus analyst Richard Jaffe wrote in a note.
Kohl’s forecast earnings of $4.05 to $4.25 per share for the year ending January 2017, largely below the average analyst estimate of $4.24 per share, according to Thomson Reuters I/B/E/S.
It also plans to open discount stores, smaller-format stores and outlet stores selling its proprietary brand FILA this year.
Excluding items, the company earned $1.58 per share, beating the average analyst estimate of $1.56 per share.
Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Shounak Dasgupta