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Kohl's (KSS) Beats on Q1 Earnings, Sales Miss Estimates
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Retailer Kohl’s Corporation (KSS - Free Report) delivered better-than-expected earnings in the first quarter of fiscal 2017. Revenues however marginally missed the consensus mark.
Kohl’s reported adjusted earnings of 39 cents per share, beating the Zacks Consensus Estimate of 28 cents by 39.3%. Earnings also grew 26% from the prior-year quarter owing to margin improvement, driven by strong inventory and expense management.
Sales and Margins
Net sales of $3.843 billion marginally missed the Zacks Consensus Estimate of $3.864 billion. Also, it declined 3.2% from the prior-year quarter due to a challenging sales environment and lower comparable store sales (comps).
Comps dropped 2.7% in the first quarter, wider than the preceding quarter’s decline of 2.2%. This signals that the company’s strategic initiative Greatness Agenda is failing to deliver results. The initiative, which commenced 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 all the four quarters of fiscal 2015, the quarterly growth rates were declining, thus posing a concern. Further, comps started declining since the first quarter of fiscal 2016 and plummeted consecutively for the next five quarters, including the current one.
We note that Kohl’s has been 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 and its competitors have struggling in an intensely competitive market from online retailers.
The sluggish trend is also reflected in Kohl’s share prices on a year-to-date basis. Notably, in the said period the stock declined 18.4% in comparison to the Zacks categorized Retail-Wholesale sector, which showcased growth of 13.9%.
However, comps decline was narrower than the year-ago quarter’s decline of 3.9%. This is due to the significant improvement in sales and traffic in the months of March and April, despite the sluggish growth trend witnessed by the company in February.
Gross margin also increased 83 basis points to 36.4% in the reported quarter. Operating margin also improved 53 basis points to 4.8% owing to lower selling, general and administrative expenses.
Kohl's Corporation Price, Consensus and EPS Surprise
As of Apr 29, Kohl’s had $625 million of cash and cash equivalents, $2.79 billion of long-term debt and $4.99 billion of shareholders’ equity. Cash flow from operations were $46 million, while capital expenditure were $216 million.
On May 10, the Kohl's board declared a quarterly cash dividend of 55 cents per share, which will be paid on Jun 21, to shareholders of record as of Jun 7.
Kohl’s ended the year with 1,154 Kohl's stores, 12 FILA Outlet stores, and three Off/Aisle clearance centers in 49 states.
Fiscal 2017 Outlook
The company did not provide any update on fiscal 2017 outlook in the current quarter. In the preceding quarter, management had anticipated earnings in the range of $3.50−$3.80 per share for fiscal 2017. Management expects sales to be up 0.7% to down 1.3%, which includes sales of approximately $160 million in the 53rd week. Comparable sales are expected to be flat to down 2%.
Rocky Brands posted a positive surprise of 42.9% in the preceding quarter. While Children’s Place has expected long-term earnings growth of 8.00%, Wal-Mart has expected long-term earnings growth of 6.1% for the next three to five years.
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Kohl's (KSS) Beats on Q1 Earnings, Sales Miss Estimates
Retailer Kohl’s Corporation (KSS - Free Report) delivered better-than-expected earnings in the first quarter of fiscal 2017. Revenues however marginally missed the consensus mark.
Kohl’s reported adjusted earnings of 39 cents per share, beating the Zacks Consensus Estimate of 28 cents by 39.3%. Earnings also grew 26% from the prior-year quarter owing to margin improvement, driven by strong inventory and expense management.
Sales and Margins
Net sales of $3.843 billion marginally missed the Zacks Consensus Estimate of $3.864 billion. Also, it declined 3.2% from the prior-year quarter due to a challenging sales environment and lower comparable store sales (comps).
Comps dropped 2.7% in the first quarter, wider than the preceding quarter’s decline of 2.2%. This signals that the company’s strategic initiative Greatness Agenda is failing to deliver results. The initiative, which commenced 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 all the four quarters of fiscal 2015, the quarterly growth rates were declining, thus posing a concern. Further, comps started declining since the first quarter of fiscal 2016 and plummeted consecutively for the next five quarters, including the current one.
We note that Kohl’s has been 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 and its competitors have struggling in an intensely competitive market from online retailers.
The sluggish trend is also reflected in Kohl’s share prices on a year-to-date basis. Notably, in the said period the stock declined 18.4% in comparison to the Zacks categorized Retail-Wholesale sector, which showcased growth of 13.9%.
However, comps decline was narrower than the year-ago quarter’s decline of 3.9%. This is due to the significant improvement in sales and traffic in the months of March and April, despite the sluggish growth trend witnessed by the company in February.
Gross margin also increased 83 basis points to 36.4% in the reported quarter. Operating margin also improved 53 basis points to 4.8% owing to lower selling, general and administrative expenses.
Kohl's Corporation Price, Consensus and EPS Surprise
Kohl's Corporation Price, Consensus and EPS Surprise | Kohl's Corporation Quote
Other Financial Details
As of Apr 29, Kohl’s had $625 million of cash and cash equivalents, $2.79 billion of long-term debt and $4.99 billion of shareholders’ equity. Cash flow from operations were $46 million, while capital expenditure were $216 million.
On May 10, the Kohl's board declared a quarterly cash dividend of 55 cents per share, which will be paid on Jun 21, to shareholders of record as of Jun 7.
Kohl’s ended the year with 1,154 Kohl's stores, 12 FILA Outlet stores, and three Off/Aisle clearance centers in 49 states.
Fiscal 2017 Outlook
The company did not provide any update on fiscal 2017 outlook in the current quarter. In the preceding quarter, management had anticipated earnings in the range of $3.50−$3.80 per share for fiscal 2017. Management expects sales to be up 0.7% to down 1.3%, which includes sales of approximately $160 million in the 53rd week. Comparable sales are expected to be flat to down 2%.
Zacks Rank & Key Picks
Kohl’s currently carries a Zacks Rank #4 (Sell).
Better-ranked stocks in the retail sector are Rocky Brands, Inc. (RCKY - Free Report) , The Children’s Place, Inc. (PLCE - Free Report) and Wal-Mart Stores, Inc. (WMT - Free Report) . While both Rocky Brands and Children’s Place sport a Zacks Rank #1 (Strong Buy), Wal-Mart carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Rocky Brands posted a positive surprise of 42.9% in the preceding quarter. While Children’s Place has expected long-term earnings growth of 8.00%, Wal-Mart has expected long-term earnings growth of 6.1% for the next three to five years.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>