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Kohl's Lowers View Due to Weak Holiday Sales, Stock Down
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Shares of Kohl’s Corporation (KSS - Free Report) slumped more than 15% in after-hours trading yesterday, when the specialty retailer lowered its profit outlook for fiscal 2016 due to sluggish holiday sales.
This Menomonee Falls, WI-based retailer now expects adjusted earnings to be in a range of $3.60–$3.65 per share for fiscal 2016. It had earlier expected earnings in the range of $3.80 to $4.00 per diluted share. The Zacks Consensus Estimate is currently pegged at $3.94 per share, higher than the new guidance range.
The lower than planned sales for the fourth quarter, due to volatile holiday sales, led to the cut in guidance. Despite experiencing strong sales on Black Friday and the week before Christmas, the retailer's comparable holiday sales fell 2.1% in the combined fiscal months of November and December 2016. Total sales for the same period declined 2.7%.
Further, Kohl’s expects gross margin to be lower than planned earlier, due to the mix and timing of the sales and the competitive promotional environment. Inventories per store at the end of the fourth quarter are projected to decrease from prior-year levels in the mid-to-high single digit range.
Weaker than expected holiday sales have pushed down shares of many department store chains including Macy’s Inc. (M - Free Report) and J.C. Penney Co. Inc. and Nordstrom Inc. (JWN - Free Report) . While Macy’s declined around 11%, both J.C. Penny and Nordstrom fell more than 5% in after-hours trading.
Retailers were also hurt due to a change in spending patterns of consumers. Demand for clothes and accessories like watches and handbags declined as consumers spent more on home renovations and cars. Notably, US department stores have been struggling to gain market share in the face of increased competition by online rivals including Amazon.com.
Amid these headwinds, Kohl’s has been making continuous efforts to improve its base business. The company started its turnaround initiative named “Greatness Agenda” in the first quarter of 2014, which was designed to increase transactions per store and sales. Though the plan has helped the company to deliver positive comps in all the quarters of fiscal 2015, the quarterly growth rates moderated gradually.
Moreover, comps declined in the first three quarters of fiscal 2016. This is raising concerns over the near term. The company is also witnessing lower spending on apparel and accessories, dwindling store traffic, competition from discount retailers and cautious consumer spending are hurting sales at department stores. Kohl’s also lowered its earnings guidance for fiscal 2015 due to lower than planned sales and margin for the fourth quarter.
The sluggish trend is also reflected in Kohl’s share prices over the past three years due to a challenging sales environment and soft comparable store sales. Notably, in the said period the stock has declined 7.4% in comparison to the Zacks categorized Retail-Wholesale sector, which showcased growth of 13.5%.
This is quite evident from its VGM Score of “A” and long-term earnings growth rate of 7.0%. What further makes us optimistic about its performance in the near term is its uptrend in estimates over the past 60 days.
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Kohl's Lowers View Due to Weak Holiday Sales, Stock Down
Shares of Kohl’s Corporation (KSS - Free Report) slumped more than 15% in after-hours trading yesterday, when the specialty retailer lowered its profit outlook for fiscal 2016 due to sluggish holiday sales.
This Menomonee Falls, WI-based retailer now expects adjusted earnings to be in a range of $3.60–$3.65 per share for fiscal 2016. It had earlier expected earnings in the range of $3.80 to $4.00 per diluted share. The Zacks Consensus Estimate is currently pegged at $3.94 per share, higher than the new guidance range.
The lower than planned sales for the fourth quarter, due to volatile holiday sales, led to the cut in guidance. Despite experiencing strong sales on Black Friday and the week before Christmas, the retailer's comparable holiday sales fell 2.1% in the combined fiscal months of November and December 2016. Total sales for the same period declined 2.7%.
Further, Kohl’s expects gross margin to be lower than planned earlier, due to the mix and timing of the sales and the competitive promotional environment. Inventories per store at the end of the fourth quarter are projected to decrease from prior-year levels in the mid-to-high single digit range.
Weaker than expected holiday sales have pushed down shares of many department store chains including Macy’s Inc. (M - Free Report) and J.C. Penney Co. Inc. and Nordstrom Inc. (JWN - Free Report) . While Macy’s declined around 11%, both J.C. Penny and Nordstrom fell more than 5% in after-hours trading.
Retailers were also hurt due to a change in spending patterns of consumers. Demand for clothes and accessories like watches and handbags declined as consumers spent more on home renovations and cars. Notably, US department stores have been struggling to gain market share in the face of increased competition by online rivals including Amazon.com.
Amid these headwinds, Kohl’s has been making continuous efforts to improve its base business. The company started its turnaround initiative named “Greatness Agenda” in the first quarter of 2014, which was designed to increase transactions per store and sales. Though the plan has helped the company to deliver positive comps in all the quarters of fiscal 2015, the quarterly growth rates moderated gradually.
Moreover, comps declined in the first three quarters of fiscal 2016. This is raising concerns over the near term. The company is also witnessing lower spending on apparel and accessories, dwindling store traffic, competition from discount retailers and cautious consumer spending are hurting sales at department stores. Kohl’s also lowered its earnings guidance for fiscal 2015 due to lower than planned sales and margin for the fourth quarter.
The sluggish trend is also reflected in Kohl’s share prices over the past three years due to a challenging sales environment and soft comparable store sales. Notably, in the said period the stock has declined 7.4% in comparison to the Zacks categorized Retail-Wholesale sector, which showcased growth of 13.5%.
Nevertheless, we believe the concerns are short lived and leave room for this Zacks Rank #2 (Buy) company to rebound. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
This is quite evident from its VGM Score of “A” and long-term earnings growth rate of 7.0%. What further makes us optimistic about its performance in the near term is its uptrend in estimates over the past 60 days.
KOHLS CORP Price, Consensus and EPS Surprise
KOHLS CORP Price, Consensus and EPS Surprise | KOHLS CORP Quote
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In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>