Kohl’s Hikes Dividend, Exceeds Q4 Earnings Estimates


Mar. 3 2020, Updated 1:13 p.m. ET

Kohl (NYSE:KSS) stock rose 4.1% in pre-market trading hours today. The company beat analysts’ sales and earnings expectations for the fourth quarter of fiscal 2019. Kohl’s also raised its quarterly dividend by 5% to $0.704 per share.

However, the stock fell 2.2% as of 12:31 PM ET amid volatile market conditions. Today, the Fed announced a rate cut by 50 basis points to fight the impact of the coronavirus outbreak.

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Kohl’s Q4 earnings surpass estimates

Kohl’s CEO Michelle Gass said that the company’s fiscal 2019 performance didn’t meet its own expectations. However, she mentioned that the company is experiencing accelerated customer traffic and new customers in its stores and online channel. The acceleration is due to new brands and partnerships launched in the year.

Kohl’s fourth-quarter sales remained essentially unchanged at $6.54 billion on a YoY (year-over-year) basis. Analysts were expecting sales of $6.52 billion. The company’s same-store sales growth was flat on a YoY basis compared to analysts’ forecast of a 0.1% decline. Kohl’s experienced softness in the women’s division mainly in the women’s classic and contemporary sportswear categories. Meanwhile, digital sales grew by double-digits in the fourth quarter.

Kohl’s fourth-quarter adjusted EPS of $1.99 beat analysts’ forecast of $1.88. However, the fourth-quarter EPS declined by 11.2% YoY, which reflected margin pressure. The company’s gross margin fell by 81 basis points to 32.7% due to competitive pricing and costs to support increased digital sales.

The operating margin fell to 6.1% in the fourth quarter of fiscal 2019 compared to 6.7% in the fourth quarter of fiscal 2018. Meanwhile, the costs to support Amazon’s (NASDAQ:AMZN) Returns program, higher marketing costs during the holiday season, higher wages, and increased rent expenses impacted the operating margin.

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Fiscal 2020 outlook

Kohl’s net sales declined by 1.5% to $18.89 billion in fiscal 2019. The company’s same-store sales declined by 1.3% in fiscal 2019 compared to 1.7% growth in fiscal 2018. The company’s adjusted EPS declined by 13.2% to $4.86 in fiscal 2019. Kohl’s expects the fiscal 2020 same-store sales growth to be -1.0%–1.0%.

Notably, the company expects the fiscal 2020 adjusted EPS to be $4.20–$4.60. Margin pressure will likely hit Kohl’s fiscal 2020 earnings. The company expects the fiscal 2020 gross margin to contract by 10–20 basis points.   

Macy’s (NYSE:M) expects fiscal 2020 net sales between $23.6 billion and $23.9 billion compared to $24.6 billion in fiscal 2019. The company expects the fiscal 2020 same-store sales growth to be -1.5% to -2.5%. Macy’s expects the fiscal 2020 adjusted EPS to be $2.45–$2.65 compared to $2.91 in fiscal 2019.

Kohl’s and Macy’s guidance reflects department stores’ struggle amid intense competition from Amazon and off-price retailers like TJX Companies (NYSE:TJX). Analysts expect TJX Companies to continue to outperform major department stores in the current fiscal year. To learn more about TJX Companies’ performance and outlook, read .

To streamline the business, Kohl’s is exiting eight women’s brands. The company will focus on brands like Nine West and Elizabeth and James. Overall, the company is optimistic about the prospects for activewear and digital sales. Kohl’s is also confident that the Amazon Returns program will continue to drive improved customer traffic.


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