Kohl’s beats estimates but stock falls

Kohl's store in Rocky Hill, CT (Mike Mozart/JeepersMedia/Creative Commons)

By Richard Foster-Shelton
Medill Reports

Kohl’s Corp. (NYSE:KSS), based in Menomonee Falls, Wis., reported increases in revenues and net income, exceeding analysts’ expectations, for the fourth quarter ended Feb. 3. But the stock fell.

Helped by strong holiday sales, tighter inventory control and a tax benefit, the company reported net income of $468 million, or $1.87 per diluted share, up from $252 million, or $1.44 per share, in the year-earlier quarter. Analysts estimated $1.77 per share.

The department store chain generated revenues of $6.8 billion, a 10 percent increase from $6.2 billion in the same quarter the previous year. Analysts estimated $5.7 billion.

During a conference call, CEO Kevin Mansell said, “We improved our merchandise margins through strong inventory management and improved promotional and permanent markdowns. All areas effectively managed their expenses.”

Kohl’s was aided by the Tax Cuts and Jobs Act, which reduced the corporate income tax rate to 21 percent from 35 percent effective Jan. 1. According to Chief Financial Officer Bruce Besanko, by revaluing deferred tax liabilities at the new tax rate, Kohl’s obtained a non-cash income tax benefit of “approximately $120 million.”

The company’s net income for 2017 was $684 million, or $5.12 per diluted share, up 5 per cent from $65l.3 million, or $3.11 per share, in 2016. Total revenue for 2017 was $19.1 billion, up 2 percent from $18.7 billion.

Kohl’s adjusted EPS for the year was $4.19, up from $3.76 in the year prior.

KSS stock closed at $62.75, down $3.34.

This year, Kohl’s stated, it’s bringing discount grocer Aldi into up to 10 stores in a pilot test as the retailer aims to scale down its real estate footprint. According to Mansell, this move allows the company to achieve “further inventory reductions and margin acceleration as a result.”

Bloomberg industry analyst Poonam Goyal said Kohl’s “should keep exhibiting strength in its top line as gross margin should be aided by speed initiatives and lean inventory as they were in 4Q.”

Photo at top: Kohl’s store in Rocky Hill, Conn. (Mike Mozart/Jeepers Media/Creative Commons)