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Kohl's (KSS) Falls Short of Q2 Earnings & Revenue Estimates

Retailer Kohl’s Corporation KSS delivered worse-than-expected earnings and revenues in the second quarter of fiscal 2015, raising concerns about the company’s strategic initiative, “Greatness Agenda,” which focuses on increasing transactions per store and thus traffic.

In the second quarter, Kohl’s reported earnings of $1.07 per share, which lagged the Zacks Consensus Estimate of $1.14 by 6.1%. Earnings also declined 5% from the prior-year quarter impacted by lower-than-expected sales and lower margins.

 

Kohl's Corporation - Earnings Surprise | FindTheBest

 

Sales and Margins

Net sales of $4.267 billion missed the Zacks Consensus Estimate of $4.310 billion by 0.9%, as the shift of sales in tax-free states from July to August was larger than anticipated. However, sales increased 0.6% from the year-ago level owing to an increase in comps.

Comps increased just 0.1% in the second quarter, but comps growth was lower than the preceding quarter’s growth of 1.4%.

Gross margin contracted 6 basis points (bps) to 38.9%, while operating margin contracted 70 bps to 9.9% due to higher operating expenses. We note that the company had anticipated higher expenses related to the rollout of the beauty initiatives to hamper margins in the second quarter.

Store Update

At the end of the quarter, Kohl’s operated 1,164 stores in 49 states. The company did not open any store in the quarter.

Other Financial Details

As of Aug 1, 2015, Kohl’s held $934 million of cash and cash equivalents compared with $1.19 billion as of May 2, 2015. The company ended the quarter with long-term debt of $2.79 billion, flat sequentially.

During the quarter, Kohl's board announced a quarterly dividend of 45 cents per share, which will be paid on Sep 23 to shareholders of record as of Sep 9.

Outlook

Kohl’s did not provide any guidance but it had earlier expected fiscal 2015 earnings in the range of $4.40 to $4.60 per share.

Kohl’s has a Zacks Rank #3 (Hold). Some better-ranked companies in the retail sector include Ingles Market, Inc. IMKTA, The Kroger Co. KR and J.C. Penny Company JCP. All of them hold a Zacks Rank #2 (Buy).

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KROGER CO (KR): Free Stock Analysis Report
 
PENNEY (JC) INC (JCP): Free Stock Analysis Report
 
KOHLS CORP (KSS): Free Stock Analysis Report
 
INGLES MARKET A (IMKTA): Free Stock Analysis Report
 
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