Kohl’s Beats on Q4 Earnings, Issues Weak FY 2020 View

Kohl’s Beats on Q4 Earnings, Issues Weak FY 2020 View
March 4, 2020

 

Department store operator Kohl’s Corp (KSS: NYSE) shares lost 2.63% or $1.01 to close at $37.43 even after the company surpassed analysts forecast for the fourth quarter of fiscal 2019. The company claimed that its partnership with e-commerce giant Amazon.com and other firms lured more shoppers to its outlets. Kohl’s also issued a weak FY 2020 earnings outlook. The shares of Kohl’s have dropped by over 43% in the past year.

Menomonee Falls, Wisconsin-based company, reported fourth-quarter revenue of $6.83 billion, an increase of 0.1% to $6.82 billion in the year-ago period. Net sales were $6.537 billion in 4Q 2019, compared with $6.535 billion in the comparable quarter last year. Analysts had anticipated revenue of $6.523 billion for the reported quarter.

Kohl’s, which has a market cap of roughly $6.10 billion, recorded net income of $265 million, or $1.72 per share, in the recent quarter, down from $272 million, or $1.67 a share, in the prior-year period. Barring one-time charges, Kohl’s recorded earnings of $1.99 per share, beating the $1.88 per share anticipated by analysts polled by Refinitiv.

Same-store sales remained unchanged, beating analysts call for a decline of 0.1%. The company’s CEO Michelle Gass stated that the retail chain recorded an increase in traffic, both physical and online, from new customers in the fourth quarter.

Under the partnership with Amazon.com, the company accepts returns of goods that were ordered online. Kohl’s has also entered into an agreement with Planet Fitness Inc., a fitness center operator, to establish workout centers close to certain stores. The chain is fighting competition from off-price and online retailers, and also conventional retailers such as Target and Nordstrom.

Chief Executive Officer Michelle Gass commented on the partnership as follows: “We are encouraged by the acceleration of traffic and new customer acquisition in our stores and online driven by the unprecedented level of new brands and partnerships.”

Going forward, the company anticipates FY 2020 earnings in the range of $4.20 to $4.60 per share. The company’s margins have been decreasing as huge discounts are offered to attract shoppers. Kohl’s anticipates the gross margin to decline by 10-20 basis points from the earlier year. As per a survey conducted by Refinitiv, analysts are predicting earnings of $4.59 per share. The company expects same-store sales to range between negative 1% to positive 1% in fiscal 2020. FactSet forecasts EPS of $4.58 per share and a comparable sales decline of 1.3%.

The company stated that its forecast does not include the likely impact of the coronavirus outbreak, which originated in Wuhan, China. Kohl’s clarified that China is not the top sourcing market for private labels.  The company had posted weak holiday sales figures, nudging the retailer to slash its FY 2019 profit outlook. The company’s same-store sales dropped by 0.2% in November and December 2019. Specifically, Kohl’s women’s related business did not perform well during the holiday season.

Kohl’s stated that it would intend to solve some problems by gradually eliminating eight of its women’s brands, which did not perform as anticipated, all while launching new brands. Poor holiday sales also drove analysts to question the effectiveness of Kohl’s partnership with Amazon, where it accepts returns associated with Amazon at all its locations. However, Gass has stated that the partnership “is working.”

The company has boosted its dividend by 5% to $0.704 per share payable on April 1st, 2020.

The quarterly earnings beat and weak FY 2020 outlook are expected to keep the stock range-bound in the short-term.

The historical price chart indicates that the stock is trading near its major support level of 37. Additionally, the stochastic oscillator is in the oversold region. Therefore, we are anticipating the stock to move up in the short-term.

kss - technical analysis - 4th March 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins


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