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Why Kohl's, Gap, Macy's, and Other Department Store Stocks Are Down Today

By John Rosevear - May 19, 2020 at 11:54AM

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Kohl's reported earnings, and they weren't good.

What happened

Several department store and apparel chain operators were trading lower on Tuesday morning after Kohl's (KSS 1.72%) reported a larger-than-expected loss for the quarter that ended on May 2. 

Here's where things stood as of 11:00 a.m. for these five retailers' stocks, relative to their closing prices on Monday.

  • Bed Bath & Beyond (BBBY 21.82%) was down 5.2%.
  • Gap (GPS 2.50%) was down 4.5%.
  • Kohl's was down 9.4%.
  • Macy's (M 2.20%) was down 6%.
  • Nordstrom (JWN 0.54%) was down 5.3%.

So what

Kohl's reported its fiscal first-quarter earnings before the market opened on Tuesday, and they weren't quite what Wall Street had expected. In the three months that ended on May 2, Kohl's lost $541 million, or $3.20 per share on a non-GAAP (adjusted) basis, on revenue of $2.43 billion. 

That was a small beat (on revenue) and a big miss (on earnings). Wall Street had expected an adjusted loss of $1.75 per share on revenue of $2.16 billion. A year ago, Kohl's reported adjusted earnings of $0.61 per share on revenue of $4.1 billion. 

A Kohl's sign on the outside of a store.

Image source: Kohl's.

Kohl's earnings miss -- or at least its larger-than-expected loss -- is probably why this group of stocks was trading lower on Tuesday. But the details of the company's report present a somewhat more nuanced view. 

While it's true that restrictions imposed to slow the spread of the COVID-19 virus took a big toll on the company's business, Kohl's was able to make up some of the lost ground via online sales, which rose 24% in the quarter from a year ago.

CEO Michelle Gass said that Kohl's had been performing in line with expectations before the crisis, and that quick action amid the early outbreak helped it preserve cash. Kohl's ended the quarter with about $2 billion on hand. And its recovery is underway: It now has about half of its roughly 1,100 U.S. stores reopened, she said. 

Now what

It appears that consumer discretionary investors are already resetting their expectations for other companies in the sector after Kohl's earnings report. While Bed Bath & Beyond provided an update when it reported earnings on April 15, the others are expected to update investors soon: Gap is expected to give an update at its annual meeting later today; Nordstrom will hold its annual meeting tomorrow, and will report earnings after the market closes on May 28; and Macy's will release its preliminary first-quarter results on Thursday, May 21.

John Rosevear has no position in any of the stocks mentioned. The Motley Fool recommends Nordstrom. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Kohl's Corporation Stock Quote
Kohl's Corporation
KSS
$33.18 (1.72%) $0.56
The Gap, Inc. Stock Quote
The Gap, Inc.
GPS
$10.64 (2.50%) $0.26
Macy's, Inc. Stock Quote
Macy's, Inc.
M
$19.96 (2.20%) $0.43
Nordstrom, Inc. Stock Quote
Nordstrom, Inc.
JWN
$24.37 (0.54%) $0.13
Bed Bath & Beyond Inc. Stock Quote
Bed Bath & Beyond Inc.
BBBY
$12.95 (21.82%) $2.32

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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