Kohl’s gives a dire warning for 2016 sales

Kohl's sales on the decline through 2017

Kohl’s is warning investors that sales could fall this year and that it is unlikely to reach its 2017 target of $21 billion.

The company says a weak economy and slowing consumer spending are the key culprits for a likely slowdown.

Kohl’s, which is closing 18 stores this year, watched shares fall by 1.9% to $44.60 on Thursday.

Kohl’s forecast’s full-year sales to fall or grow by 0.5%.

It’s been a tough year for department store operators. Macy’s is closing 40 US stores and was forced to layoff thousands of workers following a horrible fourth quarter.

Department stores were hurt in 2015 by falling spending in categories such as apparel, unseasonably warm weather in the second half of 2015, and growing competition from Amazon.

“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 to investors.

Kohl’s sales slipped in November and December, which led the company to forecast full-year earnings well below analysts’ average estimate.

The company, known to be the most weather-sensitive, was hurt by winter storm Jonas in January, which took a $20 million chunk of sales.

“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 revealed during a conference call.

Kohl’s forecast earnings of $4.05 to $4.25 per share for the year ending January 2017. Analysts are calling for $4.24 per share.

Much like Macy’s Backstage, the company plans to open more discount stores and small-format stores under its FILA brand in 2016.

Shares at Kohl’s are trading up 1.85% at 12:29 PM EST.

Kohls Shares

Excluding items, the company earned $1.58 per share, just edging out analysts expectations of $1.56 per share.

Written by Tammy Johnson

Tammy Johnson

Tammy Johnson is the Retail Editor at BusinessPundit. She focuses on Fortune 500 retail company's and disruptive brick-and-mortar and e-commerce companies that are changing the retail landscape.