Kohl's shares plunged as much as 25% on Thursday after the retailer reported a surprise first-quarter loss and lowered its forecast for the year.

The department store chain saw a 5.3% drop in net sales for the fiscal quarter ending May 4, and comparable sales were down 4.4%. The company said lower clearance sales versus last year amounted to a 600-basis-point drag on comparable sales.

"Our first quarter results did not meet our expectations and are not reflective of the direction we are heading with our strategic initiatives," Kohl's CEO Tom Kingsbury said in a statement.

"We continue to have high conviction in our strategy and believe that our key growth initiatives, including Sephora, home decor, gifting, impulse, and our upcoming partnership with Babies ‘R’ Us, will contribute more meaningfully going forward," Kingbury added. "That said, we recognize we have more work to do in areas of our business."

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The company forecast fiscal 2024 net sales to fall between 2% and 4%, compared with its previous expectation of between a 1% drop and a 1% rise.

It also expects annual earnings per share in the range of $1.25 and $1.85, compared with its previous forecast of $2.10 to $2.70.

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The company reported a per-share loss of 24 cents in the first quarter, while analysts were expecting a profit of 4 cents per share, according to LSEG data.

Kohl's dismal results come as consumers are prioritizing essential purchases over discretionary products like apparel, electronics and home goods, while their budgets continue to be squeezed by higher inflation.

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However, the company's results are in contrast to some other retailers, including Abercrombie, which reported strong first-quarter sales owing to its merchandise being more on-trend. 

Reuters contributed to this report.