Kohl’s stock tumbles after reporting massive forecast cut, weak sales

Yahoo Finance Live anchors discuss Kohl’s stock performance after the retailer cut its full-year earnings outlook.

Video transcript

BRIAN SOZZI: Here are three things you need to know right now. There is no other way to put it, folks. Today's disaster story is department store retailer Kohl's. The company cut its full-year earnings outlook to $2.80 a share to $3.20 a share, from $6.45 to $6.85 a share previously, after a very brutal second quarter. Julie, I'm keeping my intro very short here, in brief, because we have been very, very critical of this company.

But this is a terrible quarter. And if you go back, really a terrible job by this company's board of directors. Terrible job by the management team. It's a quarter like this that usually gets a CEO canned. It is unclear to me how Michelle Gass even gets to have a name on this press release.

It was a bad quarter of a company that botched a sale process just a couple of months ago, reportedly getting offers of over $60. $60! Now we reached out to Kohl's this morning, sent them an email. We asked Michelle to come on here, explain what in the world is going on. Because I was talking to shareholders of Kohl's this morning, and they are totally dismayed! One shareholder told me that the management team is absolutely inept. And he has a point after this quarter and the warning.

JULIE HYMAN: OK. I'm not going to offer any recommendation. I don't know who remains a shareholder of this thing, first of all.

[LAUGHTER]

BRIAN SOZZI: BlackRock and Vanguard own close to 20% of Kohl's. And now it's on them to put the heat on this board!

JULIE HYMAN: Well, BlackRock--

BRIAN SOZZI: These guys are terrible!

JULIE HYMAN: BlackRock and Vanguard-- listen, they don't own it because they necessarily made the decision to own it. Kohl's is still a part of various indices. They have big ETF and index businesses. It's not like they said this is a great bet, and that's why they put money into Kohl's necessarily. It's because they are indexed to it.

When you talk about the forecast, I just want to put a fine point on that forecast, because it was so dramatic, the cut to the forecast. The company is now saying for the full year, earnings per share are going to be $2.80 to $3.20. The prior forecast, $6.45 to $6.85. And then you see the net sales forecast as well, now expecting a drop in sales of 5% to 6%, which is just incredible.

Now the reason I perhaps don't get quite as exercised about it--

BRIAN SOZZI: I don't know why I do get--

JULIE HYMAN: --as you do.

BRIAN SOZZI: --angry. I don't know.

JULIE HYMAN: Well, because-- I get it.

BRIAN SOZZI: That's other issues with me, but. You know.

JULIE HYMAN: You're a former retail analyst. I get it. You're passionate about this area. I don't get as exercised about Kohl's for a couple of reasons, even though, yes, BlackRock and Vanguard hold it. It's not that widely held.

Retailers, as a rule, are not that widely held. And for example, when you have a big company, or you have an Elon Musk, or someone like that coming out and making commentary that then has a big ripple effect because they have a big reach, that kind of stuff gets me worked up. I was thinking about this this morning, why you get so worked up about Kohl's, I don't get--

BRIAN SOZZI: It was in the newsroom. It was very clear. I was really--

JULIE HYMAN: Oh, I know.

BRIAN SOZZI: --really quite frustrated.

JULIE HYMAN: And this is why I don't get quite so worked up about Kohl's.

BRIAN SOZZI: But, you know, I think where my anger comes from-- it is watching management teams-- not just in retail-- doing a horrible job for shareholders. Not just institutional. There are a lot of retail investors that are waking up, coming on the Yahoo Finance platform, going to lose their shirt because of the terrible decisions by CEO Michelle Gass and chairman of Kohl's Peter Boneparth. This company was pushed to sell itself by Engine Capital in December of 2021. Stock was at $48.

JULIE HYMAN: Right.

BRIAN SOZZI: They were exploring a sale throughout this tire-- for the most part of this year. Got-- reportedly-- bids in the $50 to 60 range. And I think they even had a deal in place with Franchise Group, which then pulled its offer. Then it offered, take the company private for $60. Your job as a Board of Directors is to maximize shareholder value.

These guys have destroyed the company. Now you can get a stock trading, what, below $30?

JULIE HYMAN: You know, I will say if you look across the department store landscape, it's not like it is strewn with success stories right now, right? So you're talking about an area-- an industry-- that is already challenged. Even Macy's has come back from the lows. But it's really just a less worse story for many of these big department store companies.

So you have that environment, and then you have this questionable decisions by management layered on top of that. But to be sure, it's not like it's wine and roses out there for their competitors.

BRIAN SOZZI: No. And it's just bizarre to me. And just my last point here, Julie, it's-- I've not seen a story like this where there's been very changes-- not a lot of changes in the executive suite where you can come out here, continue to disappoint on earnings, badly miss your forecasts, continue to come out and warn, not do well inside of a two-year period post-pandemic where people are buying clothes again. And you-- I've been critical of Macy's, too, but people have gone back to Macy's and buy clothes. And they have been able to forecast results, and not come out here and warn. This is a bad story. I mean, this is a bad story.

JULIE HYMAN: Well, let's--

BRIAN SOZZI: There has to be changes.