Kohl’s Corp. took a big step toward regaining the confidence of the investment community Wednesday by reporting a higher-than-expected 3.7 percent increase in comparable sales for the holiday quarter and raising guidance accordingly.
Based on a 3.7 percent increase in fourth-quarter comps, the Menomonee Falls, Wisc.-based midtier department store group raised and narrowed its full-year earnings guidance to a range of $4.20 and $4.22 a diluted share. In October, as it fought off weaker sales trends, Kohl’s said it would come in for the year at the low end of its earlier guidance of between $4.05 and $4.45. The updated figure implies fourth-quarter EPS of between $1.77 and $1.79 a share, well above the analysts’ consensus estimate for $1.63.
Investors rewarded the firm with the strongest gain among U.S.-based retail equities, sending shares up $3.99, or 6.4 percent, to $66.87, establishing a 52-week high of $67.15 in midday trading.
“We are pleased with our fourth-quarter sales as we saw our base business improve and our new strategic framework, the Greatness Agenda, take hold,” said Kevin Mansell, Kohl’s chairman, president and chief executive officer.
The update represents a significant improvement for Kohl’s, which had struggled along with many other middle-market retailers with poor traffic during much of 2014. Heading into the fourth quarter, year-to-date sales were off 1.9 percent, to $12.69 billion; comps were off 2.2 percent, and net income, at $498 million, was 10.3 percent below the $555 million earned during the first nine months of fiscal 2013.
Mark Altschwager, analyst at Baird Equity Research, noted that national brands — including Nike and the recently launched Izod in men’s and Juicy Couture in women’s — paced sales gains and that the launches performed in line with company expectations.
“We were encouraged by several components of the comp, including positive transactions for the first time since 2012…positive comps in both the charge and non-charge customer base…and on- or above-plan performance of the new loyalty program rolled out in October.”
The comp increase was above a consensus estimate for a 1.9 percent rise and the company’s guidance for a 2 to 3 percent increase, Altschwager added.
Mansell and Kohl’s management laid out their plans for the future at an investors’ conference in October.
Kohl’s said it would report fourth-quarter and full-year results on Feb. 26. It operates 1,163 stores in 49 states.