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Why Is Kohl's (KSS) Down 64.6% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Kohl's (KSS). Shares have lost about 64.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Kohl's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Kohl's Q4 Earnings Beat Estimates, Dividend Hiked

Kohl's Corporation reported fourth-quarter fiscal 2019 results, wherein both top and bottom lines came ahead of the Zacks Consensus Estimate. Moreover, management announced a 5% hike in its quarterly cash dividend on Feb 26, taking it to 70.4 cents per share. This is payable on Apr 1 to stockholders of record, as of Mar 18. Shares of the company were up more than 5% during the pre-market trading session on Mar 3.

Kohl’s adjusted earnings of $1.99 per share surpassed the Zacks Consensus Estimate of $1.88. However, the bottom line declined 11% on a year-over-year basis. The downside can be accountable to reduced gross margin and increased SG&A expenses.

Total revenues came in at $6,832 million compared with $6,823 million in the prior-year period. Total revenues came ahead of the Zacks Consensus Estimate of $6,810 million. Net sales remained almost flat at $6,537 million, while other revenues grew 2.4% to $295 million in the quarter. Further, comps were flat year over year compared with 1% growth in the year-ago quarter.

However, gross margin plummeted 81 basis points (bps) to 32.7% in the reported quarter. SG&A expenses rose 2.8% to $1,742 million. As a percentage of sales, it grew 70 bps to 25.5%. Further, operating income came in at $401 million, down 9.1% from the prior-year quarter’s figure.

Other Financial Details

Kohl’s company ended the quarter with cash and cash equivalents of $723 million, long-term debt of $1,856 million and shareholders’ equity of $5,450 million. The company generated net cash from operating activities of $1,657 million during fiscal 2019.

Guidance

While Kohl’s fiscal 2019 results came below management’s expectations, it remains encouraged about the improved store and online traffic. This can be accountable to the company’s focus on innovation, brand investments and alliances undertaken in the fiscal. For fiscal 2020, management expects comps growth in the range of negative 1% to positive 1%. In fiscal 2019, comps dropped 1.3%.

Further, it expects the gross margin to decline 10-20 bps. SG&A expenses are anticipated to increase 1-2% from the 2019 figure. Kohl’s envisions adjusted earnings per share of $4.20-$4.60 for fiscal 2020, which indicates a decline from $4.86 in fiscal 2019.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -239.07% due to these changes.

VGM Scores

Currently, Kohl's has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Kohl's has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.



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