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Kohl’s warns of margin pressure, shares tumble

imageStock Markets11 minutes ago (May 20, 2021 11:40AM ET)

(C) Reuters. FILE PHOTO: A sign marks a Kohl’s store in Medford, Massachusetts, U.S., February 21, 2017. REUTERS/Brian Snyder

(Reuters) -Kohl’s Corp on Thursday warned of a hit to its full-year profit margin from higher labor and shipping costs as well as selling fewer products at full-price due to intensifying competition as the economy reopens, sending its shares down 12%.

U.S. retailers, including Macy’s (NYSE:M) and Target (NYSE:TGT), are all vying for a bigger share of consumers’ wallet in the upcoming shopping boom, although they will be expected to discount more to remain competitive and attract shoppers.

In the first quarter, Kohl’s (NYSE:KSS) earned $1.05 per share, crushing estimates of 4 cents, as tight inventory control allowed it to sell more products at full price.

It, however, cautioned that the pricing environment would not be sustainable as demand for some products wanes toward the back half of the year. Kohl’s also forecast annual sales growth largely below analysts’ expectations.

“There is more full-priced selling that is available to us. So we’re taking advantage of that now. We do believe as the year progresses … some of those tailwinds will ease,” Chief Financial Officer Jill Timm said on a post-earnings call.

The retailer also said it expects its digital business, which made up only about 30% of its sales in the first quarter, to hurt its margins due to higher shipping costs.

Still, Kohl’s raised its forecast for 2021 profit, as the U.S. department store operator bets on a shopping boom after a gloomy year due to the coronavirus pandemic.

In the quarter ended May 1, net sales rose about 70% to $3.66 billion, beating estimates.

Kohl’s warns of margin pressure, shares tumble

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