Kohl’s Corp.’s share price nose-dived after the department store chain’s full-year outlook fell short of Wall Street expectations, making investors antsy as the vital holiday shopping season kicks off.
Both retailers and investors alike had been hoping that a strong jobs market and robust consumer confidence would translate into a stellar holiday season, but weaker outlooks from departments store chains such as Nordstrom have set off jitters in the markets over profits and Kohl’s did nothing to calm their nerves.
Investors looked straight past better-than-anticipated third-quarter numbers and zeroed in on Kohl’s forecast for diluted earnings per share to come in between $5.35 to $5.55. While it was an improvement on their prior guidance, the midpoint was below the average analyst estimate of $5.51 and sent its stock price down more than 8 percent.
The company cited steep holiday shipping costs and the fact that the season would be promotion heavy as the traditional bricks-and-mortar retailers battle it our with the online crowd for sales as reasons behind the outlook.
Nevertheless, Randal J. Konik, an equity analyst at Jefferies, brushed off concerns, writing in a note to clients that it was still a Kohl’s buyer.
“We aren’t concerned as the guide still appears conservative, the consumer is strong, and we expect continued market share gains ahead,” he said.
“We are buyers given traction in proprietary brands, share gains from peer closings, thoughtful traffic-driving partnerships, omni initiatives and favorable off-mall real estate.”
Market jitters overshadowed a positive report, where net income was $161 million in the three months ending Nov. 3, or 98 cents a share, up from $117 million in the same period a year earlier, or 70 cents. That beat analysts’ expectations of by 2 cents.
Group sales, meanwhile, were 1.3 percent higher at $4.63 billion, while comparable sales, which covers stores open for the past 12 months, ticked up 2.5 percent, marking the fifth consecutive quarter of growth.
Michelle Gass, Kohl’s chief executive officer, told analysts on a call after the earnings report was released that she was bullish and felt “really, really good” about the holiday season.
“The backdrop around the consumer indicators are positive. They have been all year. So there is certainly no reason to believe that will change as we head into the holidays,” she said, although she added that the holiday season was always a promotional time.
She added that Kohl’s was sticking to its strategy of continuing to attract millennial shoppers, and has a number of initiatives under its belt including its collaboration with Popsugar as it heads into next year.
As for the pilot of allowing Amazon customers to return packages for free at Kohl’s stores, Gass said she was really pleased with it: “We’re driving a great level of customer engagement. Customers love it.
“We are now across three market so that gives us a greater sense of scale in terms of the opportunity. So we and Amazon are continuing to assess that, but like I said, we feel really good about the customer experience how it reduces friction for them, and more to come.”