Kohl’s Stock Sinks On Q2 Earnings Miss & Profits Dive

Ramped-up strategic initiatives in its athletic, beauty and loyalty divisions weren’t quite enough to raise Kohl’s Corp. above industry-wide sales declines.

The Menomonee Falls, Wis.-based department-store chain’s earnings were down more than 10 percent in midday trading after it missed market watchers’ forecasts for the second quarter, ended Aug. 1, 2015.

Kohl’s Chairman, President and CEO Kevin Mansell said the firm’s sales landed below the company’s expectations as lower merchandise demand in the quarter and shifts of tax-free holidays from July into August weighed on margins.

The CEO reassured investors that the company’s expenses “were well-managed for the season.”

“Our inventory receipts are well-positioned for the back-to-school and fall seasons,” Mansell added in a release.

Looking ahead, digital development, beauty, athletic and Kohl’s Yes2You loyalty program remain priorities, Mansell said.

Net Income: Net income for the second quarter totaled $130 million, a 44 percent year-over-year decline, from the comparable quarter, when earnings were $232 million.

EPS: Earnings per diluted share were 66 cents, a significant drop from the year-ago quarter, when diluted earnings per share were $1.13.

Net Revenue: Revenues gained slightly year-over-year, to $4.27 billion in Q2, compared with revenues of $4.24 billion in the year-ago quarter.

Hit, Miss or Beat: Kohl’s missed market watchers forecasts for EPS and revenues. Analysts polled by Yahoo Finance had predicted EPS of $1.16 and revenues of $4.31 billion.

Executive Insights: “Although sales for the second quarter didn’t meet our expectations, we’re pleased to see more consistent positive comp-store sales results, especially in the quarter that was negatively impacted by a later start to the back-to-school shopping season.”
— Mansell on the Q2 conference call

“Comp sales increased slightly in the quarter, at 0.1 percent. Although we aren’t satisfied with the level of comp sales, we are pleased that we are starting to show some consistency in our sales results. This is the first time since 2011 that we have achieved three consecutive quarters of positive comps.”
— Wesley McDonald, Kohl’s CFO, on the Q2 conference call

Looking Ahead: Kohl’s now expects its FY15 EPS to come in at the low range of its prior guidance of $4.40 to $4.60.

Analyst Insights: “Uncharacteristically, Kohl’s updated its language on guidance for the year after just two quarters, which we believe shines a bright light on the lack of confidence we’re hearing across the channel heading into back-to-school.”
— UBS Investment Bank analyst Michael Binetti, in an Aug. 13 note

“Kohl’s 2Q miss is concerning in our view given [that it is the] second straight quarter of comps missing expectations [and] elevated inventories [as well as] our tepid outlook for back-to-school and fall spending.”
— Cowen & Co., analyst Oliver Chen, Aug. 13 note


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