Kohl’s Corp.’s fourth-quarter results bested Wall Street’s estimates for both earnings per share and sales.
For the quarter ended Feb. 3, net income jumped 85.7 percent to $468 million, or $2.81 a diluted share, from $252 million, or $1.44, a year ago. On an adjusted basis, EPS was $1.87. The quarter ended had an extra week, totaling 14 weeks for the quarter versus 13 weeks in the year ago. Net sales for the period rose 9.2 percent to $6.78 billion from $6.21 billion, with comparable-store sales gaining 6.3 percent.
Wall Street was expecting income of $1.77 on sales of $6.74 billion.
Despite the beat on Wall Street’s estimate, shares of Kohl’s were trading down 7.4 percent to $61.22 in early trading. The shares were essentially following the trend set by the major indices in the U.S. equity markets, which were all down.
Kevin Mansell, Kohl’s chairman, chief executive officer and president, said EPS “exceeded the high end of our most recent guidance by 11 cents per share.”
Mansell added that over the course of the year, “[w]e saw consistent, sustained improvement in sales trends, which culminated in a 6.3 percent increase in our fourth-quarter comp sales. We improved our merchandise margins through strong inventory management and improved promotional and permanent markdowns. All areas effectively managed their expenses. And, we ended the year with 7 percent less inventory.”
Christina Boni, vice president and senior analyst at credit ratings agency Moody’s Investors Service, said initiatives at Kohl’s appear to be taking hold. “Kohl’s showed significant progress in the fourth quarter with continued momentum [in] comp store sales,” Boni said, adding that Kohl’s also benefited from disciplined inventory management and an improvement in merchandising margins.
Matthew R. Boss, analyst at J.P. Morgan, said that the top-line at Kohl’s has “improved sequentially four straight quarters,” helped by operational investments. He sees incremental upside potential for fiscal 2018 driven by traffic partnerships such as with Amazon, continued mall rationalization by its competitors and inventory management.
The company ended the year with 1,158 Kohl’s stores in 49 states.
For fiscal 2018, the company guided diluted EPS to between $4.95 and $5.45. Guidance also included comps at flat to up 2 percent, and a sales range between up 1 percent to down 1 percent. The company is also expecting $300 to $400 million in share repurchases and capital expenditures for the year of $700 million.
The company said it plans to shift its reporting cadence on earnings in fiscal 2018. It currently expects to report first quarter 2018 financial results during the week of May 20, 2018.