Middle-income customers have been particularly pressured by higher inflation, which has put a damper on sales of apparel, shoes and other discretionary items.
Shoppers are making less trips to stores, spending less money per transaction and opting for less expensive private brands according to the retailer.
The company is adjusting its business plans to account for a softer demand outlook, according to a statement from the CEO.
Even though Kohl's beat analysts' expectations for its fiscal second-quarter profit and revenue, shares of the company fell in premarket trading.
Net sales are now expected to be down 5% to 6% compared with a previous range of flat to up 1%. The company now expects adjusted earnings per share to be between $2.80 and $3.20, compared with its previous guidance of $6.45 to $6.85.
The retail environment deteriorated during the bidding process and the company terminated talks to sell its business to the franchise group. Activist investors pressured Gass and her team to sell the company.
Difficult financing and retail environments made it difficult to reach an agreement.
Walmart and Target both reiterated their full-year forecasts this week, even as their profits are under pressure.
Walmart said it saw more higher- and middle-income consumers visit its shops in search of discounted items. Target tried to clear excess merchandise before the holiday season weighed down its earnings.
Lower sales led to a jump in inventory levels at Kohl's. The increase was due to the company's recent investments in beauty and its strategy to pack and hold more goods
The results of the fiscal second quarter ended July 30 were compared with what analysts were expecting.
Net income for the three-month period ended July 30 plummeted to $143 million, or $1.11 per share, from $382 million, or $2.48 a share, a year ago.
The sales fell from a year ago.
Revenue at the stores open at least a year fell 7.7%.
Gass said that the company is a financially strong one.
The company said it has entered into an agreement to buy back stock.
The cash dividend of 50 cents a share will be paid in September.
As of Wednesday's market close, Kohl's shares have fallen by more than one third.
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