Why Is Kohl's (KSS) Up 41.1% Since Last Earnings Report?

It has been about a month since the last earnings report for Kohl's (KSS). Shares have added about 41.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Kohl's due for a pullback? 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 catalysts.

Kohl's Posts Wider-Than-Expected Q1 Loss, Sales Fall

The deadly coronavirus that led to the closure of stores severely impacted Kohl's Corporation’s first-quarter fiscal 2020 results. This operator of specialty department stores posted wider-than-expected loss for the quarter under review. Also, the company’s top line fell sharply from the year-ago period.

Nonetheless, the company took every step to safeguard its financial position amid the crisis that helped generate positive operating cash flow. Also, management informed "We have begun the rebuilding process, recently reopening about 50% of our stores across the country.”

To address challenges tied to the pandemic, Kohl's remains focused on lowering expenses, managing inventory receipts and curbing capital expenditures. It curtailed planned capital expenditures by roughly $500 million, and also hold-off share repurchase and suspend dividend payment beginning in the second quarter of fiscal 2020. It replaced and upsized revolver to $1.5 billion secured facility, and issued $600 million notes due 2025.

Kohl's posted adjusted loss of $3.20 per share wider-than-the Zacks Consensus Estimate of loss of $1.79. This also compares unfavorably with adjusted earnings of 61 cents reported in the year-ago period. Lower net sales and increased interest expense hurt the company’s bottom-line results.

Total revenues came in at $2,428 million, down 40.6% from the prior-year period. The metric came below the Zacks Consensus Estimate of $2,620 million, after surpassing the same in the preceding quarter. Net sales plunged 43.5% to $2,160 million, however, other revenues grew 0.8% to $268 million in the quarter.

Gross margin contracted to 17.3% in the quarter under review from 36.8% in the year-ago period. Notably, SG&A expenses declined 16.4% to $1,066 million. However, as a percentage of total revenues, SG&A expenses increased to 43.9% in the quarter from 31.2% in the prior-year period. The company reported operating loss of $718 million against operating income of $118 million in the prior-year quarter.

Other Financial Details

Kohl’s ended the quarter with cash and cash equivalents of $2,039 million, long-term debt of $3,449 million and shareholders’ equity of $4,790 million. The company generated net cash from operating activities of $53 million during the quarter under discussion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -155.1% due to these changes.

VGM Scores

Currently, Kohl's has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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