These Factors Could Affect Kohl’s Earnings



Earnings performance

Kohl’s (KSS) exceeded analysts’ earnings expectations in the first two quarters of fiscal 2017. However, the company missed analysts’ earnings expectations in fiscal 3Q17, which ended on October 28, 2017. Excluding one-time items, Kohl’s delivered adjusted EPS of $0.70 in fiscal 3Q17, lagging the consensus analyst estimate of $0.72.

Why 3Q earnings fell

Kohl’s 3Q17 adjusted EPS fell 12.5% on a year-over-year basis. This decline was a result of higher costs on lower-than-expected sales. The company’s bottom line was negatively impacted by higher costs, including higher shipping costs, and a 1.4% rise in selling, general, and administrative (or SG&A) expenses. Of the $15 million rise in SG&A expenses, $8 million was attributable to Hurricane Harvey and Hurricane Irma.

A 4.7% rise in depreciation and administrative expenses due to higher technology amortization also impacted Kohl’s earnings. Rival Macy’s (M) adjusted EPS surged 35.3% in fiscal 3Q17 as the company’s inventory controls helped in bringing down costs.

Earnings outlook

Following an improvement in the same-store sales in fiscal 3Q17, Kohl’s raised the low end of the full-year fiscal 2017 guidance. The company now expects its adjusted EPS in the $3.60 to $3.80 range in fiscal 2017. The company previously expected its fiscal 2017 EPS in the $3.50 to $3.80 range. Analysts expect the company’s fiscal adjusted EPS to come in at $3.78.

For fiscal 4Q17, analysts expect the company’s adjusted EPS to rise about 2.0% on a year-over-year basis to $1.47.

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