4 Things Investors Should Look Out for in Kohl’s Earnings Report

Kohl’s Corp. has offered a preliminary look at its fourth-quarter financial report.

The Menomonee Falls, Wis.-based company anticipated diluted earnings per share in the range of $1.00 to $1.05, before considering any impact from tax planning strategies. For the three months ended Jan. 30, revenues declined roughly 10%, including a 11% drop in same-store sales. Still, its comps recorded their third consecutive quarter of sequential improvement.

“Our fourth-quarter performance exceeded our expectations across all key metrics with sales strengthening as we moved through the period,” CEO Michelle Gass said in a statement.

Ahead of Kohl’s quarterly earnings call, which will take place before market open on March 2, here’s what investors should watch out for.

Analysts’ bets

Kohl’s projected that fourth-quarter earnings would exceed its forecasts, with “significant improvement” from the third quarter. Wall Street is counting on earnings of 70 cents per share and revenues of $5.96 billion.

Comparatively, for the three months ended Oct. 31, the chain logged a loss of $12 million, or 8 cents per share, versus the prior year’s income of $123 million, or 78 cents per share. Adjusted earnings per share of a penny, however, were well ahead of market watchers’ predictions of a loss of 43 cents per share.

According to the company, the preliminary results reflect a “better-than-expected gross margin rate and strong SG&A expense management.” (A decline in SG&A expenses was attributed primarily to reductions in store, marketing and technology expenses.) It added that its gross margin continued to benefit from disciplined inventory management and optimization in promotional strategies.

Digital demand

As Americans increasingly turned to online channels to do their shopping, Kohl’s more than doubled the number of stores carrying incremental inventory in order to fulfill digital orders during the holidays. (It operates more than 1,100 locations across 49 states.)

According to Gass, digital sales growth in the fourth quarter “remained strong,” with its brick-and-mortar locations “playing a critical role in supporting the heightened demand.” Its e-commerce business, which accounted for more than 40% of net sales, saw an increase of upwards of 20%.

Athleisure push

In a presentation to investors back in October, Kohl’s unveiled a new strategic plan to drive top-line growth, expand its operating margin, maintain a strong balance sheet and build a strong organizational core. As part of those goals, it has been investing heavily in activewear, outdoor and casual apparel — areas that have all seen solid gains amid the COVID-19 pandemic.

About four months ago, the retailer announced the launch of private-label offering FLX (pronounced “flex”), which features performance fabrics, functional details and inclusive sizes. It also put Cole Haan in its roster for spring ’21, following the addition of Toms Shoes and Lands End to its portfolio for fall. In a statement, Gass said Kohl’s is “very pleased with the continued progress we are making against [our] strategic framework.”

Sephora partnership

As part of a 10-year partnership, beauty giant Sephora plans to open 850 permanent shop-in-shops — each spanning about 2,500 square feet — inside Kohl’s stores by 2023. The boutiques are set to launch this fall in 200 stores as well as online, commencing a multiyear buildout that the department store expects would drive “significant growth” for its business.

“As we carry this momentum into 2021, we are confident that our key strategic initiatives will accelerate our top line growth and expand our operating margin,” said Gass. Kohl’s had previously unveiled plans to achieve better margins at a level of between 7% to 8%.

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