Kohl’s Corp (NYSE:KSS) – Sales decline but profits beat Wall Street consensus in Q2

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Updated: 21 August 2019
  • Retail chain posts $1.55 adjusted earnings per share and $4.43bn revenue versus $1.53 and $4.25bn estimates
  • Sales down overall but growth recorded during final six weeks of second quarter
  • Partnership with Amazon helped to increase foot traffic
  • Shares up around 4% on Tuesday but stock still 27% off since 1st January. Market valuation at $7.8bn

Kohl’s Corp (NYSE:KSS) shares took flight on Tuesday after the department store retail chain followed Walmart by beating the Wall Street consensus on both earnings and revenue in the second quarter. Cost-cutting measures and a shuffled product offering increased footfall at its US stores.

Kohl’s came in with Non-GAAP EPs of $1.55 for Q2, a full 2 cents above estimates, and revenue of $4.43bn, which was down 3.1% year-over-year but $180m ahead of estimates from analysts. Net income for the period was $247m.

The Wisconsin-based company said comparable same-store sales did decline 2.9% during the latest period, wider than the 2.4% drop off consensus, but expects a rebound in the coming months after the final six weeks of the quarter delivered 1% growth.

CEO Michelle Glass said in a statement: “This positive trend has continued into August driven by a successful start to the back-to-school season. We are confident that our upcoming brand launches, program expansions, and increased traffic from the Amazon returns program will incrementally contribute to our performance during the balance of the year and beyond.”

Kohl’s latest report was well received internally and has given little reason for a deviation from previous annual earnings guidance. The company still expects to deliver $5.15–$5.45 EPS for the year, which does not include ‘impairments’ and costs related to store closures during the first half of 2019. Analysts polled expect profits of $5.23 per share.

Kohl’s shares fell 1.45% immediately after the report was published but quickly rallied and were up 4.21% in Tuesday’s premarket. The uptick followed a poor session for the company on Monday when shares slumped 6% late on to finish at $48.20. Shares were changing hands for $50.23 early on Tuesday.

The majority of analysts are still on the fence in terms of the company’s short to medium-term prospects. The latest returns, though healthy, are unlikely to result in a major shift in positions during the next week. Kohl’s currently has 7 Hold and 7 Buy ratings, with just one bear at Sell. The average price target of $57.94 is more than $7 up on the current price.

Market watchers will also be keeping a close eye on its relationship with Amazon and other partners during the final months of the year. Kohl began to accept Amazon returns at its stores in the US four months ago, which built on its initial partnership in 2017 to push Amazon’s tablets and smart speakers. Kohl’s also recently started working with Fanatics to sell licensed sports clothing including NFL jerseys.