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A Closer Look at Kohl’s Q3 Bottom-line Performance

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Dec. 4 2020, Updated 10:53 a.m. ET

What drove the EPS beat?

Kohl’s (KSS) reported its third-quarter results for fiscal 2018 on November 20. The third-quarter adjusted EPS came in at $0.98, easily beating analysts’ estimate of $0.96. On a year-over-year basis, EPS rose 40.0%, driven by top-line growth and a reduced provision for taxes.

Share repurchases also provided a bit of upside. In the third quarter, the company repurchased 1.5 million shares. For fiscal 2018, the company expects to buy back stock worth $350 million to $400 million.

For fiscal 2018, Kohl’s has forecast EPS at $5.16–$5.36, versus the earlier guidance of $4.96–$5.36. The adjusted EPS is projected at $5.35–$5.55, versus the previous guidance of $5.15–$5.55.

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JCPenney’s (JCP) adjusted EPS of -$0.52 for the third quarter of fiscal 2018 came in narrower than analysts’ expectation of EPS of -$0.56. The adjusted EPS came in significantly wider than EPS of -$0.33 in the third quarter of the last fiscal year. The year-over-year bottom-line performance took a hit from lower sales.

Macy’s (M) reported third-quarter adjusted EPS of $0.27, which were better than analysts’ expectation of $0.14 and the $0.23 it reported in the third quarter of fiscal 2017. Reduced interest expenses drove the company’s bottom line, along with higher sales.

Kohl’s margin numbers

Kohl’s gross margin rose by 25 basis points to 37.0%, driven by prudent inventory management. Third-quarter selling, general, and administrative expenses grew 2.6% to $1.38 billion. The operating income was $258 million, compared with $257 million reported in the same quarter last year.

For the first nine months of 2018, Kohl’s generated $1.42 billion in cash from operations—versus the $869 million in cash generated during the same period in fiscal 2017.

For fiscal 2018, the gross margin is expected to expand by 25 to 30 basis points. The company’s selling, general, and administrative growth is forecast at the higher end of the guided range of 1%–2%.

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