Kohl’s Earnings (KSS) Q12023

Kohls Shares soared on Wednesday as the struggling retailer posted a surprise profit and confirmed its full-year guidance as it pursues a turnaround.

Shares of the company rose more than 8% in morning trading, after surging even earlier in the day.

Throughout the retail industry, walmart, Target, Foot locker and others explained how high food prices have made it harder to sell clothing, sneakers and other discretionary merchandise. Kohl’s, however, had to tackle a more fundamental hurdle: proving that its brand still resonates with shoppers and getting back on track with steady sales growth.

In a call with analysts, Kohl CEO Tom Kingsbury and CFO Jill Timm highlighted the changes the retailer has made to win back customers and attract new ones. It opens more Sephora stores, expands into merchandise categories such as pet and home décor, and offers pre-holiday gift items.

Every time shoppers walk into a store, Kingsbury said they now see “something new, something different, something very giftable and a different look”.

Kohl’s reiterated its outlook for the full year. He said he expects net sales to be between a 2% and 4% decline, including the roughly 1% impact of having one more week of sales this year. He said he expects earnings per share to be between $2.10 and $2.70, excluding one-time charges.

Here’s how the retailer fared for the quarter that ended April 29 compared to what Wall Street expected, based on a Refinitiv analyst survey:

  • Earnings per share: 13 cents against an expected loss of 42 cents
  • Revenue: $3.36 billion vs. $3.34 billion

In the fiscal first quarter, Kohl’s net sales fell to $3.36 billion from $3.47 billion a year ago.

Same-store sales fell 4.3% in the quarter, roughly matching the 4.5% decline that Wall Street expected, according to StreetAccount.

The company reported net income of $14 million, or 13 cents per share, compared with $14 million, or 11 cents per share, a year earlier.

Kohl’s surprise quarterly profit comes after several quarters of disappointing sales and a falling share price. Last year, the retailer became the target of activist investors Ancora Holdings and Macellum Capital, who pushed the company to oust then-CEO Michelle Gass and shake up its board. Kohl’s also discussed and then ended an offer last year to sell its business to the owner of Vitamin Shoppe Franchise Group.

Since then, Kohl’s has brought in its new CEO Kingsbury, a former managing director of the off-price retailer Burlington Stores. He stepped into the role of interim CEO and later into the permanent position after Gass, his former CEO, left to become the next leader of Levi Strauss.

In recent months, Kohl’s efforts to reinvent itself and woo buyers have encountered other obstacles. Many middle-income consumers feel pressured by inflation and are buying fewer discretionary items, such as clothing. That contributed to a big loss in Kohl’s holiday quarter and a weak outlook, which the Wisconsin-based company reiterated on Wednesday.

Despite this, Kingsbury said Kohl made progress in the fiscal first quarter. Its inventory stood at $3.5 billion at the end of the quarter, down 6% year-over-year. Investors watched these levels closely as the glut of merchandise at many retailers led to higher markdowns and lower profits.

On the analyst’s call, he said “the middle-income customer is in a hurry,” but said Kohl’s can attract them with a focus on value.

Kohl’s margins improved in the quarter as freight and online shipping costs fell and the company became more strategic with markdowns. Kingsbury said the company wanted to simplify markdowns for customers, but also offer targeted offers and clearance events instead of general discounts.

Shares of Kohl’s closed Tuesday at $19.27. That’s less than half of its high of 52, which was $47.63. Shares of the company have fallen nearly 23% so far this year, even as the S&P 500 has risen around 8% and the retail-focused XRT has fallen nearly 2%.


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