Kohl's backs full-year guidance despite net sales decline

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Investing.com -- Kohl’s (NYSE:KSS) has reported a slide in net sales in the second quarter, but the department store chain reaffirmed its full-year guidance, sending shares higher in premarket trading Wednesday.

Like other retail groups, Kohl's has been facing a slowdown in spending on nonessential items by inflation-hit customers.

However, the company was still boosted by strong sales momentum at Sephora shops operating within its stores. The French cosmetics firm has been opening operations at Kohl's locations in recent years as the retailer looks to increase its beauty offerings.

Net sales dropped to $3.68 billion in the three months ended on July 29, a decline of 4.8% compared to the corresponding period last year. Bloomberg projections had seen the figure at $3.71B.

Meanwhile, gross margin as a percentage of net sales decreased by 61 basis points to 39.0%, weighed down by an uptick in expenses. Operating income also slipped to $163 million from $266M in the prior year.

Yet Brookfield, Wisconsin-based Kohl's still backed its annual guidance for a net sales drop of 2% to 4% and diluted earnings per share of $2.10 to $2.70, citing moves to open more Sephora shops, improve its shopping experience, and reduce inventories. Chief executive Tom Kingsbury has been pushing to scale back the reliance Kohl's has on discounts and instead focus on more in-demand products like work wear.