Kohl's Stock Fell 18.8% on Dismal 4Q15 Sales, Fiscal 2015 Outlook
4Q15 sales below estimates
As mentioned in Part 1 of this series, Kohl’s (KSS) reported disappointing sales for fiscal 4Q15 ended January 30, 2016. The company reported 0.8% growth in sales for 4Q15 and 1% for fiscal 2015. The company missed the consensus Wall Street analysts’ estimate for 4Q15 sales of $6.5 billion, which reflected growth of 1.9% on a year-over-year basis.
What went wrong in 4Q15?
Kohl’s (KSS) lower sales were attributed to a very slow start in November 2015 and weaker-than-expected sales in January as adverse weather resulted in soft demand for cold-weather merchandise. These unfavorable factors offset the strong holiday season sales that the company experienced over the period from Thanksgiving through Christmas.
Kohl’s reported same-store sales growth of 0.4% and 0.7% in 4Q15 and fiscal 2015, respectively. The footwear and home merchandise categories performed well in 4Q15 while the accessories category was the weakest. Kohl’s constitutes 0.2% of the iShares Russell Mid-Cap ETF (IWR).
In January, Kohl’s rival Macy’s (M) reported a 4.7% year-over-year decline in same-store sales on an owned-plus-licensed basis for the November–December 2015 period. The company blamed unfavorable warm weather as the primary factor for the lower holiday sales. Macy’s announced cost initiatives to increase its productivity and improve its performance. For more information, please read Macy’s Reports Dismal Holiday Sales: Will Restructuring Help?
In November 2015, Nordstrom (JWN) lowered its fiscal 2015 outlook following weaker-than-expected sales in 3Q15.
In contrast to some of its peers, JCPenney’s (JCP) persistent turnaround efforts helped it in boosting its holiday season sales. The company reported a 3.9% rise on a year-over-year basis in same-store sales in the November–December period, which marks the crucial holiday season.
Greatness Agenda strategy
Kohl’s has been aggressively pursuing its Greatness Agenda strategy to boost its sales. Kohl’s Greatness Agenda strategy includes several initiatives such as offering unique merchandise by store based on local tastes, a focus on the women’s apparel business, and the launch of new store formats.
However, intense competition from online retailers like Amazon (AMZN) has been impacting the sales of Kohl’s and its peers. Department stores are also facing intense rivalry from off-price retailers like TJX Companies (TJX) and Ross Stores (ROST). Consumers are cautious about their spending on discretionary goods, and they continue to look for bargains offered by off-price stores.
In the final part of this series, we’ll discuss how the news of its lower-than-expected sales impacted Kohl’s valuation.
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