Kohl's (KSS) earnings in the first quarter of 2024

Kohl's Shares plunged more than 20% on Thursday after the company posted a surprise per-share loss, well below Wall Street's expectations for a slight profit.

That drop in shares puts the stock on track to record the largest single-day percentage drop in its history.

In an interview with CNBC, CEO Tom Kingsbury attributed the sales slowdown to difficult comparisons. He said department stores had higher-than-usual clearance levels in the prior-year period as they tried to clear inventory and boost their turnaround plan.

He added that sales trends started the quarter strong in January and February, but weakened in the final five weeks of the period as customers refrained from purchasing seasonal products, such as spring clothing, due to bad weather. He said that “fortunately, we see it coming back as the weather improves.”

For investors, Kohl's weak results have raised questions about the company's turnaround strategy. Led by Kingsbury, the discount chain's previous leader Burlington Stores, Kohl's has tried to attract shoppers by adding fresh products such as home decor, gift items and pet supplies. It has also opened more Sephora stores within its stores.

So far, those efforts have not been reflected much in the numbers. Kohl's reported a net loss of $27 million, or a loss of 24 cents per share, for the first quarter compared with a year-ago profit of $14 million, or 13 cents per share.

Net sales decreased 5.3% to $3.18 billion compared to the previous year.

Here's how Kohl's fared in its fiscal first quarter compared to what Wall Street expected, according to a survey of LSEG analysts:

• Loss per share: 24 cents versus an expected profit of 4 cents
• Revenue: $3.18 billion vs. $3.34 billion expected

The company on Thursday lowered its guidance for 2024. It now expects full-year net sales to decline between 2% and 4%. Wall Street analysts surveyed by LSEG expected its 2024 sales guidance to reflect a 0.2% gain.

Kohl's expects full-year diluted earnings per share in the range of $1.25 to $1.85, well below the $2.34 in earnings per share expected, according to LSEG.

In addition to the company's specific challenges, Kingsbury said the company took a more conservative stance with its full-year outlook due to higher interest rates and inflation.

“While spending among our high-income customers has remained stable, our middle-income customers continue to be impacted,” he said in the statement.

Despite the first-quarter results, he told CNBC that Kohl's has moved forward with newer initiatives. For example, he said, the women's category showed positive trends and Sephora stores have continued to be a bright spot.

For Sephora at Kohl's, comparable sales, a metric that excludes the effect of store openings and closings, rose 20% year over year during the quarter.

This is much more than Kohl's comparable sales, which fell 4.4% during the same period.

Kohl's plans to open another 140 Sephora stores, most of which will open in the second quarter. It announced in March that it would add similar Babies R Us outposts to about 200 locations.

Other new categories are also doing well, Kingsbury said, with comparable sales of seasonal and everyday décor up more than 30%. Some of those gains are because Kohl's didn't have many items in those categories before. It has expanded its selection, offering more picture frames, wall art and decorative glassware, such as vases.

“We're going to continue to work hard in these underpenetrated categories,” Kingsbury said.

Inventory was down 13% year over year as Kohl's reduced expenses and tried to give itself more flexibility to respond quickly and buy on-trend merchandise. He has focused on that, especially in the youth department, which serves teenage girls. Kohl's is moving that department next to Sephora to encourage shoppers to browse clothing as well.

“You have to be on the trend at the right time,” Kingsbury said. “You can't be post-trend, for sure.”