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Kohl's (KSS) Rallies on Solid Strategic Framework, E-Commerce
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Kohl’s Corporation (KSS - Free Report) is well-positioned on the back of its growth-oriented efforts. In this regard, the company is gaining from its strategic framework introduced in October 2020. Moreover, strength in its e-commerce business is yielding. Also, Kohl's partnerships have been driving growth.
Such upsides have helped the stock surge 371.2% in the past year compared with the industry’s rally of 300.7%. Let’s delve deeper.
Strategic Framework Holds Promise
Kohl’s strategic framework focuses on four key areas — driving top-line growth, expanding operating margin, implementing disciplined capital management as well as undertaking an agile accountable and inclusive culture. Under its driving top-line growth initiative, the company intends to become the most trusted retailer of choice for the active and casual lifestyle. Also, it expects to spur growth in women’s business and build a beauty business. This is likely to be aided by the recent alliance with Sephora. Further, Kohl’s is on track to grow its Active category from 20% to at least 30% of its business. Well, strength in the company’s core national brands; increased dedicated space in stores; expanding outdoor via prudent alliances like the recent Eddie Bauer launch and strengthening of its athleisure opportunity through the launch of FLX products are impressive steps in this direction.
Apart from these, Kohl’s is undertaking strategic efforts to solidify its omnichannel business, with its investments yielding results. Moving on, the company intends to reach its operating margin goal of 7-8% by 2023 with the help of modest level of growth, its ongoing transformational margin initiatives and continued focus on operational excellence. Kohl’s expects to achieve this target via gross margin as well as selling, general and administrative expense efficiency. Finally, Kohl’s is committed toward disciplined capital management by maintaining investment grade rating, generating robust cash flows and returning wealth to shareholders. Also, the company’s innovative and adaptive learning approach as well as focus on diversity and inclusion bodes well.
Lucrative Partnerships Driving Growth
Kohl’s has been strengthening its ties with retail giant Amazon (AMZN - Free Report) to drive traffic. Incidentally, the company has been benefiting from the rollout of its Amazon returns program nationwide. According to this program, Kohl’s stores accept free, unpackaged and easy returns for customers of Amazon. The company is impressed with performance of the Amazon returns program. One of the prime objectives of this program is to convert more customers as loyal Kohl’s shoppers. In its last earnings call, management stated that it witnessed acceleration of post-holiday traffic in January via the program. During 2020, the company had at least two million new unique customers thanks to the Amazon Returns program.
Further, the company's recent solid partnership with Sephora to create a new era of elevated Beauty at Kohl's, bodes well. Management plans to open 200 Sephora at Kohl's stores during 2021, starting in August. Also, the company’s online beauty selection on Kohls.com will exclusively feature an extensive collection of Sephora's prestige product offerings beginning Aug 1. By 2023, Kohl's expects to expand Sephora shops to at least 850 stores, with 400 locations projected to open in 2022.
Online Business: Key Driver
Kohl’s has been benefiting from its growing digital business for a while now. Stellar digital sales added gleam to fourth-quarter fiscal 2020 performance. Impressively, digital sales soared 22% year over year and contributed 42% to net sales in the quarter. Management is ramping up digital marketing and enhancing its website to cater to customers’ needs, especially amid increased shift to online shopping amid the coronavirus outbreak.
Wrapping Up
Kohl’s has been witnessing year-over-year decline in sales in the past few quarters. During fiscal fourth quarter, total revenues declined 10.1%, although the metric reflects sequential improvement. Net sales fell 10.1% in the quarter. Additionally, gross margin contracted 73 basis points to 32% in the quarter under review. The downside was caused by increased freight surcharges amid rising digital penetration.
That said, we believe that the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company stay afloat amid such headwinds.
Hibbett Sports, Inc. (HIBB - Free Report) , which sports a Zacks Rank #1, has a long-term earnings growth rate of 17.2%.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Kohl's (KSS) Rallies on Solid Strategic Framework, E-Commerce
Kohl’s Corporation (KSS - Free Report) is well-positioned on the back of its growth-oriented efforts. In this regard, the company is gaining from its strategic framework introduced in October 2020. Moreover, strength in its e-commerce business is yielding. Also, Kohl's partnerships have been driving growth.
Such upsides have helped the stock surge 371.2% in the past year compared with the industry’s rally of 300.7%. Let’s delve deeper.
Strategic Framework Holds Promise
Kohl’s strategic framework focuses on four key areas — driving top-line growth, expanding operating margin, implementing disciplined capital management as well as undertaking an agile accountable and inclusive culture. Under its driving top-line growth initiative, the company intends to become the most trusted retailer of choice for the active and casual lifestyle. Also, it expects to spur growth in women’s business and build a beauty business. This is likely to be aided by the recent alliance with Sephora. Further, Kohl’s is on track to grow its Active category from 20% to at least 30% of its business. Well, strength in the company’s core national brands; increased dedicated space in stores; expanding outdoor via prudent alliances like the recent Eddie Bauer launch and strengthening of its athleisure opportunity through the launch of FLX products are impressive steps in this direction.
Apart from these, Kohl’s is undertaking strategic efforts to solidify its omnichannel business, with its investments yielding results. Moving on, the company intends to reach its operating margin goal of 7-8% by 2023 with the help of modest level of growth, its ongoing transformational margin initiatives and continued focus on operational excellence. Kohl’s expects to achieve this target via gross margin as well as selling, general and administrative expense efficiency. Finally, Kohl’s is committed toward disciplined capital management by maintaining investment grade rating, generating robust cash flows and returning wealth to shareholders. Also, the company’s innovative and adaptive learning approach as well as focus on diversity and inclusion bodes well.
Lucrative Partnerships Driving Growth
Kohl’s has been strengthening its ties with retail giant Amazon (AMZN - Free Report) to drive traffic. Incidentally, the company has been benefiting from the rollout of its Amazon returns program nationwide. According to this program, Kohl’s stores accept free, unpackaged and easy returns for customers of Amazon. The company is impressed with performance of the Amazon returns program. One of the prime objectives of this program is to convert more customers as loyal Kohl’s shoppers. In its last earnings call, management stated that it witnessed acceleration of post-holiday traffic in January via the program. During 2020, the company had at least two million new unique customers thanks to the Amazon Returns program.
Further, the company's recent solid partnership with Sephora to create a new era of elevated Beauty at Kohl's, bodes well. Management plans to open 200 Sephora at Kohl's stores during 2021, starting in August. Also, the company’s online beauty selection on Kohls.com will exclusively feature an extensive collection of Sephora's prestige product offerings beginning Aug 1. By 2023, Kohl's expects to expand Sephora shops to at least 850 stores, with 400 locations projected to open in 2022.
Online Business: Key Driver
Kohl’s has been benefiting from its growing digital business for a while now. Stellar digital sales added gleam to fourth-quarter fiscal 2020 performance. Impressively, digital sales soared 22% year over year and contributed 42% to net sales in the quarter. Management is ramping up digital marketing and enhancing its website to cater to customers’ needs, especially amid increased shift to online shopping amid the coronavirus outbreak.
Wrapping Up
Kohl’s has been witnessing year-over-year decline in sales in the past few quarters. During fiscal fourth quarter, total revenues declined 10.1%, although the metric reflects sequential improvement. Net sales fell 10.1% in the quarter. Additionally, gross margin contracted 73 basis points to 32% in the quarter under review. The downside was caused by increased freight surcharges amid rising digital penetration.
That said, we believe that the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company stay afloat amid such headwinds.
Better-Ranked Retail Picks
Abercrombie & Fitch Co. (ANF - Free Report) , which sports a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 18%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hibbett Sports, Inc. (HIBB - Free Report) , which sports a Zacks Rank #1, has a long-term earnings growth rate of 17.2%.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2021 today >>