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Kohl's (KSS) Stock Down on Q1 Earnings Miss & Slashed View

Zacks Equity Research

Shares of Kohl's Corporation KSS crashed 9.5% during the pre-market trading session on its dismal first-quarter fiscal 2019 results. Both top and bottom lines declined year over year and lagged the Zacks Consensus Estimate. Notably, this marked the company’s first earnings and revenue miss after five and seven straight beats, respectively. Additionally, comps broke the strong growth trend and management slashed its earnings outlook for fiscal 2019.

Kohl's Corporation Price, Consensus and EPS Surprise

Kohl's Corporation Price, Consensus and EPS Surprise

Kohl's Corporation price-consensus-eps-surprise-chart | Kohl's Corporation Quote

Q1 in Detail

Kohl’s adjusted earnings of 61 cents per share missed the Zacks Consensus Estimate of 67 cents and declined 4.7% on a year-over-year basis. This can be accountable to soft revenues and increased SG&A expenses.

Total revenues came in at $4,087 million, which fell 2.9% from the prior-year quarter. Moreover, the figure came below the Zacks Consensus Estimate of $4,203 million. Net sales also decreased 3.3% to $3,821 million, while other revenues grew 4.3% to $266 million in the quarter.

Further, comps declined 3.4% against growth of 3.6% recorded in the year-ago quarter. This crushed the company’s positive comps record of six straight quarters.

Moving on, gross margin fell 6 basis points (bps) to 36.8% in the reported quarter. SG&A expenses as  percentage of sales expanded 130 bps to 31.2%. Further, operating income came in at $118 million, down from the prior-year quarter’s $210 million.

Other Financial Details

This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $543 million, long-term debt of $1,855 million and shareholders’ equity of $5,442 million. The company generated net cash from operating activities of $136 million during the first quarter.

On May 15, Kohl’s announced a quarterly cash dividend of 67 cents per share, which is payable on Jun 26, 2019, to stockholders of record as on Jun 12.

Other Developments

The company unveiled a long-term contract with Fanatics to widen the fan gear product range for Kohl’s online customers. Fanatics is a leading worldwide name for licensed sports merchandise. The wide range of products, including team apparel, jerseys and other merchandise categories, will be available to Kohl’s online shoppers from fall 2019.

Guidance

Kohl’s clearly began fiscal 2019 on a soft note, owing to the weaker-than-anticipated sales. However, the company is on track with its sales-driving initiatives, which are likely to enhance its performance in the second half. To this end, management is particularly encouraged about the nationwide rollout of its returns program with Amazon AMZN along with other extended programs and brand launches.

While the company is focused on efficient cost management, it is somewhat conservative about fiscal 2019. Consequently, Kohl’s slashed its bottom-line view and envisions earnings per share to be $5.15-$5.45, down from the prior projection of $5.80-$6.15.

Kohl’s stock has dipped 1.3% in the past three months compared with the industry’s decline of nearly 5%.

Don’t Miss These Solid Retail Bets

Target TGT, with long-term earnings per share growth rate of 6.3%, carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Walmart WMT, also with a Zacks Rank #2, has long-term earnings per share growth rate of 4.6%.

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