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Kohl's (KSS) Down 8.2% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Kohl's (KSS). Shares have lost about 8.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Kohl's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Kohl's Q4 Earnings Top Estimates, Revenues & Comps Decline

Kohl's posted fourth-quarter fiscal 2023 results, with the bottom line increasing year over year and surpassing the Zacks Consensus Estimate. However, the top line fell from the year-ago quarter’s levels and missed the consensus mark.

Quarter in Detail

Kohl's posted earnings of $1.67 per share against a loss of $2.49 posted in the year-ago quarter. The bottom line came ahead of the Zacks Consensus Estimate of $1.24.

Total revenues came in at $5,956 million, down from the prior-year quarter’s level of $6,019 million. Net sales inched down 1.1% year over year to $5,710 million. The Zacks Consensus Estimate for the top line was pegged at $5,969.5 million.

Comparable sales decreased 4.3%. We had expected a comparable sales decline of 1.2%.

Kohl's gross margin expanded 937 basis points (bps) to 32.4% in the reported quarter. We had expected the gross margin to expand 880 bps to 31.8% in the quarter under review.

SG&A expenses dropped 4% to $1,610 million. As a percentage of total revenues, SG&A expenses fell 82 bps to 27%. Our model suggested an SG&A expense decline of 2.9%, with the rate contracting 50 bps to 27.4%.

The company posted an operating income of $299 million, down from $302 million in the year-ago period. The operating income margin expanded by 1,005 bps to 5%.

Other Details

Kohl’s ended the quarter with cash and cash equivalents of $183 million and shareholders’ equity of $3,893 million. The company generated an operating cash flow of $1,168 million for the year ended Feb 3, 2024.

Management expects capital expenditures of nearly $500 million for 2024 (including the expansion of its Sephora collaboration and store-related investments).

On Feb 28, 2024, Kohl’s declared a quarterly cash dividend of 50 cents per share, payable on Apr 3, 2024, to shareholders of record as of Mar 20.

In another press release, Kohl’s unveiled its partnership with the owner of the Babies“R”Us brand. The partnership will bring baby gear, furniture and activity among others to Kohl’s.

Guidance

Kohl’s expects net sales in the range of 1% growth to 1% decline in 2024. Comparable sales are anticipated to be flat to 2% growth. The operating margin is likely to be 3.6-4.1%.

Earnings per share (EPS), excluding non-recurring charges, are envisioned in the band of $2.10-$2.70. The company delivered an EPS of $2.85 in 2023.

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How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 114.29% due to these changes.

VGM Scores

At this time, Kohl's has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Kohl's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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