Retailer Kohl’s Corporation KSS delivered weaker-than-expected first quarter of fiscal 2016 results, where both earnings and revenues missed the consensus mark. In the first quarter, Kohl’s reported earnings of 31 cents per share, missing the Zacks Consensus Estimate of 36 cents by 13.9%. Earnings also declined a significant 50% from the prior-year quarter due to a drop in sales and lower gross margin. Kohl's Corporation - Earnings Surprise | FindTheBest Sales and Margins Net sales of $3.972 billion also lagged the Zacks Consensus Estimate of $4.124 billion by 3.7%. Sales also declined 3.7% from the prior-year quarter due to a challenging sales environment. We note that this was the first drop in net sales in the last six quarters as the demand for spring apparel was hurt by unseasonably cool weather in late March and early April. Comps declined 3.9% in the first quarter as against preceding quarter’s growth of 0.4% and prior-year growth of 1.4%. This signals that the company’s strategic initiative ‘Greatness Agenda’ has failed to deliver results. The initiative, which began in the first quarter of 2014, was designed to increase transactions per store and sales. Though the plan has helped the company to deliver positive comps in the last five consecutive quarters after persistent declines for more than a year; the quarterly growth rates have gradually gone down, which is a concern. We note that Kohl’s is struggling since the past many quarters to boost its sluggish top line. Lower spending on apparel and accessories and a general slowdown in consumer spending are hurting sales at department stores. Kohl’s Corporation remains cautious about its fiscal 2016 results and plans to close 18 stores, due to retail uncertainty as well as cautious spending by US consumers. Gross margin contracted 139 basis points (bps) to 35.5%. This was expected as the company had planned to aggressively clear excessive merchandise that resulted from lower-than-expected fourth quarter sales. Operating margin also plunged 250 bps to 4.3% due to higher expenses. Other Financial Details As of Apr 30, 2016, Kohl’s held $423 million of cash and cash equivalents compared with $707 million as of Jan 30, 2016. The company ended the quarter with long-term debt of $2.79 billion, flat sequentially. On May 11, 2016, Kohl's board declared a quarterly cash dividend of 50 cents per share, which will be paid on Jun 22, 2016 to shareholders of record at the close of business on Jun 8, 2016. Outlook The company did not provide any guidance during the first quarter. During the fourth quarter conference call, Kohl’s had stated that it will also close 18 underperforming stores in fiscal 2016, which are expected to generate annual SG&A savings of approximately $45 million and annual depreciation savings of approximately $10 million. The company had also forecast earnings in a range of $4.05 to $4.25 for fiscal 2016. It expected sales in a range of (0.5)% to 0.5%, driven by comparable sales increase of 0% to 1.0%. The company plans to repurchase shares worth $600 million at an average price of $50 per share. Kohl’s has a Zacks Rank #3 (Hold). Better-ranked companies in the broader retail sector include The Kroger Co. KR, New York & Company Inc. NWY and Shoe Carnival Inc. SCVL. All of these hold a Zacks Rank #2 (Buy). Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report NEW YORK & CO (NWY): Free Stock Analysis Report KOHLS CORP (KSS): Free Stock Analysis Report KROGER CO (KR): Free Stock Analysis Report SHOE CARNIVAL (SCVL): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research