Back to top

Image: Bigstock

Kohl's (KSS) Outlines Growth Strategy, Unveils Financial Targets

Read MoreHide Full Article

Kohl’s Corporation (KSS - Free Report) provided an update on its strategy to boost growth and become the retailer of choice for the Active and Casual lifestyle, at its virtual Investor Day. The company also unveiled new long-term financial targets, which are focused on delivering shareholders’ value.

Let’s delve deeper.

Zacks Investment Research
Image Source: Zacks Investment Research

Creating Shareholder Value

Kohl’s is targeting low-single digits percent sales growth, while its operating margin is expected between 7% and 8% in the long term. Management is anticipating mid-to-high single digit percent earnings per share (EPS) growth in the long run. Further, it expects operating cash flow of more than $5.5 billion and free cash flow to be around $2.5 billion from 2022 to 2024.

Apart from this, the company is keen on returning capital to shareholders and investing in initiatives to fuel organic growth. Kohl’s hiked its quarterly dividend by 100%, which takes its annual dividend to $2.00 per share. In addition, management approved a share repurchase plan worth $3 billion and intends to buy shares worth at least $1 billion in 2022.

Strategic Growth Initiatives

Kohl's has been updating its brand and offerings to match up to customers’ distinctive needs. The company is evolving to become a focused lifestyle concept based around the Active and Casual lifestyle. Keeping these factors in mind, management is accelerating growth across Active and Casual categories. The company is reigniting the Women’s category via growing its dress business, expanding outdoor and swim categories as well as strengthening inclusivity offering. Kohl's is striving to elevate and modernize customer experience, refresh stores and lunch innovation zones. Apart from this, the leading omnichannel retailer is enhancing the Kohl’s Card Rewards earn to 7.5% every day as well as introducing a co-branded credit card in 2023.

Kohl’s is focused on undertaking prudent partnerships to drive growth. The company's solid partnership with Sephora to create a new era of elevated Beauty at Kohl's is noteworthy. Management expects to grow its Sephora business to $2 billion via expanded store rollout to 850 stores.

The company is on track to acquire millions of new customers under the Amazon Returns program. Incidentally, Kohl’s has been benefiting from the rollout of the Amazon Returns program nationwide. This facilitates Amazon customers to return merchandise to local Kohl’s stores free of charge and regardless of whether the items are packaged or unpackaged for shipping. Kohl’s performs the return process on behalf of Amazon customers. One of the primary objectives of this program is to convert more customers into loyal Kohl’s shoppers.

Omnichannel Strength

Kohl’s is focused on growing its store portfolio and accelerating digital business growth. The company plans to open over 100 new smaller format Kohl’s stores in the coming four years. Management expects to expand its digital business to $8 billion on enhanced discovery and shopability on The company is launching self-serve buy online, pick up in store to every store in 2022. Also, it is on track to test self-serve returns and check-out. Apart from this, the company is expanding Kohl's Media Network to leverage its solid omnichannel capability. KSS is utilizing data science to improve personalization and localization across all its stores during the next two years.

We believe that the Zacks Rank #3 (Hold) company’s well-chalked growth initiatives are likely to keep it in good shape in the forthcoming periods. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Kohl’s have increased 3.5% so far this year compared with the industry’s rise of 5.5%.

3 Retail Stocks to Bet on

Here are some better-ranked stocks — Dollar Tree (DLTR - Free Report) , Capri Holdings (CPRI - Free Report) and Target Corporation (TGT - Free Report) .

Dollar Tree, the operator of discount variety retail stores, sports a Zacks Rank of 1 at present. DLTR has a trailing four-quarter earnings surprise of 11.8%, on average. DLTR has expected EPS growth rate of 13% for three to five years.

The Zacks Consensus Estimate for DLTR’s current financial year sales suggests growth of 5.5% from the year-ago period’s reported figure.

Capri Holdings, which offers accessories and footwear, sports a Zacks Rank #1 at present. The company has a significant trailing four-quarter earnings surprise, on average. CPRI has an expected EPS growth rate of 53.9% for three to five years.

The Zacks Consensus Estimate for Capri Holdings’ current financial-year sales suggests growth of 37.1% from the year-ago period’s levels.

Target, a general merchandise retailer, carries a Zacks Rank #2 (Buy) at present. TGT has a trailing four-quarter earnings surprise of 21.3%, on average. Target has expected EPS growth rate of 15% for three to five years.

The Zacks Consensus Estimate for Target’s current financial year sales suggests growth of 3.5% from the year-ago period’s levels.

Published in