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Has Kohl’s Been Able to Deliver an Improved Performance so Far?

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Earnings in first nine months of fiscal 2015

After disappointing investors in the second quarter of fiscal 2015, Kohl’s Corporation (KSS) bounced back in the third quarter of fiscal 2015, which ended October 31. The company beat the consensus Wall Street analyst earnings and sales estimates in 3Q15. In the first nine months of fiscal 2015, the company’s adjusted EPS (earnings per share) increased to $2.45 from $2.43 in the comparable period of the previous year.

However, the company’s net earnings, including one-time items, declined by 24.3% to $377 million in the first nine months of fiscal 2015, due to the impact of debt extinguishment charges of $169 million.

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Comparison with peers

Kohl’s performance in 3Q15 was impressive compared to Macy’s (M), Nordstrom (JWN), and Dillard’s (DDS), all of which missed analyst earnings and sales estimates. Kohl’s accounts for 1% of the portfolio holdings of the SPDR S&P Retail ETF (XRT). For an overview of the 3Q15 performance of department stores, read What to Expect from Department Stores after a Mixed Fiscal 3Q15.

Kohl’s sales in 3Q15 grew by 1.2% to $4.4 billion on a YoY (year-over-year) basis. The company’s 3Q15 sales benefitted from a strong back-to-school performance and late October selling periods, which were offset partially by a weak September. The 3Q15 sales of Macy’s and Dillard’s declined by 5.2% and 1.8%, respectively. Nordstrom’s 3Q15 sales grew by 6%, compared to growth rates of 9.7% and 9.1% in 1Q15 and 2Q15, respectively.

Reaping the benefits of its “Greatness Agenda”

In the first nine months of fiscal 2015, Kohl’s sales increased by 1% to $12.8 billion. The company benefitted from several initiatives implemented to improve its sales under its Greatness Agenda program. A focus on active and wellness brands, women’s apparel, national brands penetration, and online channel growth are helping the company in improving its performance in an uncertain retail environment. Meanwhile, the company is also focused on personalization efforts for attracting new customers, specifically targeting two growing population demographics: Millennials and Hispanics.

We’ll discuss the company’s stock price movement in the next part of this series.

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