A Surprise Same-Store Sales Bump Isn’t Enough To Offset An Earnings Miss For Kohl’s

Earnings Fizzle Puts Kohl’s In The Spotlight

Mixed results for Kohl’s as it posted its Q3 earnings report depressed stock prices in trading today as the retailer reported that sales took a hit when a series of hurricanes forced store closures.

“Like most retailers, our third-quarter comps were negatively impacted by the hurricanes, which resulted in the temporary closure of more than 100 of our stores. We estimated we lost approximately $15 million in sales and approximately 35 basis points to our comp sales while the stores were closed,” noted CFO Bruce Besanko on a call with investors.

Still, Kohl’s did manage some good news in Q3 — a surprise pick-up in same-store sales and a full year outlook that was revised somewhat upward.

“We are on track to achieve the goals we established with investors at the beginning of the year,” Chief Executive Kevin Mansell said on the investor call.

 

By the Numbers

Kohl’s net income dropped to $117 million, or $0.70 per share — fairly far below the $146 million, or $0.83 a share, it was reporting last year. Income also missed analysts’ forecast — they were looking for $0.72 per share.

Sales notched in at $4.33 billion — slightly higher than a year ago this time and higher than the $4.30 billion analysts were expecting.

Kohl’s quarterly same-store sales climbed 0.1 percent. That result reverses a seven-quarter, same-store sales slump and is a convincing beat on the 0.7 percent loss analysts were expecting.

“While a comparable sales rise of 0.1 percent may be meager, the fact that it brings to an end an extended period of decline is significant,” GlobalData Retail Analyst and Managing Director Neil Saunders wrote in a note to clients. “This newfound sales stability comes largely from Kohl’s efforts to increase customer traffic at its stores, something it has achieved by improving the mix of products,” Saunders added.

Mansell also touted Kohl’s upcoming partnership with Amazon, noting that tests of the return hub and smart home mini-stores have both been underway since October.

“From our perspective, it is very simple and very straightforward. We believe both of these tests have the potential to drive incremental traffic to our stores — which, as you know, is our number one priority.”

 

Behind the Numbers 

Looking at the firm’s unexpected bounce in same-store and full price sales, CEO Mansell was upbeat about Kohl’s quarterly performance — despite the mild handicap inflicted by the hurricanes — and its ability to pull that success through to Q4.

“Both apparel and footwear categories in active were strong, and this was driven by large increases in both Nike and Adidas, as well as continued strong performance from Under Armour,” Mansell said on a call with analysts and investors.

“We continue to gain market share in active; we expect a very strong holiday performance in both active apparel and footwear categories,” he added.

Moreover, Mansell noted, despite being struck with weakness due to the bad weather, sales picked up sharply in October — boding well for the holiday season.

“The quarter closed with strong sales in the second half of October.”

Kohl’s is also taking a slightly sunnier line on the rest of the year, projecting adjusted earnings to range from $3.60 and $3.80 a share, versus a prior expected range of $3.50 to $3.80.

 

The Killer Stats 

30 million: The number of customers regularly using at least one element of Kohl’s rewards program.

$15 million: What Kohl’s estimates it lost to Hurricanes Harvey and Irma.

30 percent: The proportion of orders made online and picked up in stores.

15 percent: The quarterly increase in online sales during Q3.

1 percent: The increase in regular price sales — clearance sales declined 7 percent.