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Kohl’s Beats Estimates for Q4, But Income and Margins Fall

With comp-store sale down for the year, Kohl’s shows signs of improvement as revenue in the fourth quarter inched up.

In a Nutshell: Kohl’s Corp. beat Wall Street estimates for adjusted fourth-quarter earnings per share (EPS) of $1.99 by 11 cents. The retailer also beat revenue estimates for the quarter by $310 million.

Kohl’s, an omnichannel retailer with more than 1,100 stores in 49 states, issued initial 2020 earnings guidance that includes expected earnings per diluted share of $4.20 to $4.60 for fiscal 2020. The guidance is based on comparable sales change of minus 1 percent to plus 1 percent and a decrease of gross margin as a percentage of sales of 10 basis points to 20 basis points compared to 2019.

“Kohl’s remains focused on its efforts to continue to drive traffic with the rebalance of its women’s portfolio, with the exit of eight underperforming brands a key element,” Moody’s retail analyst Christina Boni said. “Realigning inventories is a near-term priority, as its growth of 1.8 percent outpaced its flat sales and is critical to improving margins. Footwear, children’s and men’s were outperforming categories in the fourth quarter for Kohl’s, while women’s remained a significant headwind.”

Sales: Revenue for the fourth quarter ended Feb. 1 inched up 0.1 percent to $6.83 billion from 6.82 billion in the year-ago period. For the 2019 fiscal year, revenue fell 1.4 percent to $19.97 billion compared to 20.23 billion in the prior year.

Comparable store sales were flat for the quarter and were down 1.3 percent for the year.

Earnings: Net income for the final three months of the fiscal year decreased 3 percent to $265 million compared to $272 million in the prior-year period. For the year, net income was down 14 percent to $691 million from 801 million in fiscal 2018.

Gross margin fell to 32.7 percent in the fourth quarter from 33.5 a year earlier. For the year, gross margin declined to 35.7 percent compared to 36.4 percent in the prior year.

CEO’s Take: Michelle Gass, CEO of Kohl’s, said: “While 2019 was a year in which our financial results did not meet our expectations, it was also a year of innovation and investment that further strengthened Kohl’s differentiation in the market. We are encouraged by the acceleration of traffic and new customer acquisition in our stores and online, driven by the unprecedented level of new brands and partnerships we launched during the year. I am confident that we will build on our strengths in 2020 to stabilize and position the business for future growth.”