Kohl’s posted a bigger-than-expected drop in quarterly sales on Tuesday as cost-conscious shoppers chose to spend less at its department stores amid still high inflation, sending its shares down more than 4 percent before the bell.

American shoppers have continued to defer non-essential purchases and instead spend more dollars on essentials as resumption of student loan repayments, rising credit card debt, and higher interest rates squeeze household budgets.

The results come after retail bellwether Walmart last week took a cautious stance going into the holiday shopping season, which is expected to grow at the slowest pace in five years.

“While Kohl’s is making progress in its attempt to shore up its bottom line, it has yet to find the right formula to convince shoppers to spend,” said Insider Intelligence analyst Zak Stambor.

Kohl’s comparable sales decreased for a seventh-straight quarter, as its 5.5 percent drop missed estimates for a 3 percent fall, according to LSEG data.

The company said it expected annual sales to fall between 2.8 percent and 4 percent, compared to a previous forecast for a 2 percent to 4 percent drop. Analysts have forecast a decline of 2.5 percent.

Kohl’s inventories fell 13 percent, its third straight quarterly decline, as its efforts to trim stocks from their 2022 highs going into the holiday season began to pay off.

“It is one thing for Kohl’s to adjust its inventory mix by expanding into new categories, but it is another to build awareness of its broader selection and drive consumers into its stores to buy those items,” Stambor said.

The company raised the lower end of its annual profit forecast, expecting per-share earnings in the range of $2.30 to $2.70, up from its previous forecast of $2.10 to $2.70.

Kohl’s reported a profit of 53 cents per share in the third quarter, beating expectations of 35 cents per share.

By Granth Vanaik

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