Kohls Misses on Top and Bottom Lines in Third Quarter, Cuts Guidance

Andrew Klips |

A day after Macy’s ($M) trounced analysts and got hopes up for the upcoming holiday season, fellow department-store chain Kohl’s Corporation (KSS) delivered an earnings miss for the third quarter and cut its full-year profit outlook, sending shares lower in pre-market trading.

For the quarter ended November 2, Menomonee Falls, Wisconsin-based Kohl’s reported revenue of $4.44 billion, down 1 percent from $4.49 billion in the year prior quarter.  Net income dropped from $215 million, or 91 cents per share, last year to $177 million, or 81 cents per share, in the latest quarter.

Wall Street was expecting earnings of 86 cents per share on revenue of $4.55 billion.

Same-store sales, a closely watched metric of growth that compares sales at stores open more than one year, declined by 1.6 percent.  In the third quarter of 2012, same-store sales had increased 1.1 percent from the year earlier quarter.  Investors keep an eye on third-quarter sales because they include the back-to-school shopping season to try and get a pulse on consumer spending for the holiday season, the biggest revenue generator of the year for retailers.

Gross margin fell from $1.71 billion to $1.67 billion, as cost of merchandise sold was flat at $2.78 billion.  As a percentage of sales, gross margin was 37.5 percent, compared to 38.1 percent last year.  Operating expenses were also essentially the same as Q3 2012, dragging operating income lower by 14 percent to $365 million.

Kevin Mansell, Kohl's chairman, president and chief executive officer, maintained an upbeat attitude despite the lower figures, saying in a statement this morning, “As we enter the Holiday season, we believe we are well-positioned from a merchandise content and inventory perspective to gain market share. We have increased our marketing spending and improved its impact and reach in order to drive higher traffic to our stores and on-line.”

The company declared a cash dividend of 35 cents per share, payable on December 24 to shareholders of record on December 11.

As of November 2, Kohl’s had 1,158 stores in 49 states, compared to 1,146 stores at the same time in 2012.

Looking ahead, the company sees fourth quarter earnings between $1.59 and $1.74 per share. The guidance is based on total sales declines of 2 to 4 percent and comparable store sales declines of 0 to 2 percent.  Kohl’s lowered its annual earnings per share guidance to a range of $4.08 to $4.23 from a prior forecast of $4.15 to $4.35 per share.  Further, the company said that it will provide only annual guidance beginning in Fiscal 2014, which starts February 2.

Shares of KSS closed Wednesday trading at $58.26 for gains of 1.2 percent on the day.  In pre-market activity on Thursday following the 7 AM earnings release, share have sunk more nearly 10 percent to $52.60.  Through Wednesday, shares were ahead about 38 percent in 2013.

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Symbol Name Price Change % Volume
CRMXD Agave Silver Corp n/a n/a n/a 0
KSS Kohl\'s Corporation 45.05 1.03 2.34 3,749,592
M Macys Inc. 36.51 0.64 1.78 3,349,076


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