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Kohl's (KSS) Q4 Earnings Set to Gain From Solid Sales Drivers

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Kohl's Corporation (KSS - Free Report) is slated to release fourth-quarter fiscal 2018 results on Mar 5. This department store chain has delivered average positive earnings surprise of 11.3% in the trailing four quarters.

Let’s see what’s in store for the company this time around.

What to Expect?

The Zacks Consensus Estimate for earnings currently stands at $2.17, which has remained stable in the past 30 days and reflects growth of roughly 16% from the year-ago quarter’s reported figure. Moreover, the consensus mark for revenues is nearly $6.8 billion, reflecting a marginal rise from the year-ago quarter’s figure.

Factors Impacting Kohl's

Kohl's recently reported 2018 holiday sales numbers, which form a significant part of the fourth quarter. Notably, Kohl’s comparable store sales (comps) growth for the combined November and December 2018 period came in at 1.2%, down from 6.9% witnessed in 2017 holiday season. Nevertheless, management is impressed with the little but positive comps growth momentum witnessed during the holiday season this time. This was mainly backed by attractive product offerings and effective marketing strategies across stores and online platforms. More specifically, the company witnessed transaction rises and double-digit growth in the digital platform during the period.

These upsides led the company to raise fiscal 2018 earnings view. Management now expects earnings of $5.50-$5.55 per share compared with the previous projection of $5.35-$5.55. This makes us quite hopeful about the upcoming release.

Well, we note that Kohl's has long been gaining from its sturdy comps trend, which seems to be benefiting from the company’s Greatness Agenda initiative, focus on boosting traffic and enhanced operational excellence. Notably, the Greatness Agenda initiative was commenced in first-quarter fiscal 2014 to drive transactions per store and sales. Also, Kohl’s has been strengthening its ties with retail giant Amazon to drive traffic. In the long run, the company is expected to receive significant boost from this partnership.

Apart from these factors, and Kohl’s regular innovation and brand-building efforts, the company is poised to keep gaining from its e-commerce business, which has improved significantly over the last few years. In order to improve its online offerings, Kohl’s has been expanding its e-commerce fulfillment centers. Additionally, the company focuses on strengthening its in-store pickups. Backed by such factors, digital sales witnessed a mid-teen increase during the third quarter, with more than 70% of digital traffic coming from mobile sales. Clearly, these efforts serve as tailwinds for the quarter to be reported.

Will Sales Drivers Offset Hurdles?

Kohl’s has been experiencing rising selling, general and administrative (SG&A) expenses for a while now. SG&A expenses increased almost 2.6% during the third quarter of fiscal 2018. This was preceded by increases of 4% and 3.7% rise during the second and first quarters of fiscal 2018, respectively. For this fiscal, management now expects increase in SG&A expenses toward the high end of the previously guided range of 1-2%. The surging SG&A expenses may affect the company’s profitability.

Nevertheless, we expect Kohl’s robust revenue-driving initiatives to counter these headwinds and aid bottom-line growth. This is also apparent from management’s raised outlook for fiscal 2018 as discussed above.

What the Zacks Model Unveils

Our proven model doesn’t show a beat for Companhia Brasileirathis earnings season. For this to happen, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter

Though Kohl’s has a Zacks Rank #3, its Earnings ESP of -0.15% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Zumiez ZUMZ has an Earnings ESP of +0.45% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kroger (KR - Free Report) has an Earnings ESP of +3.42% and a Zacks Rank #2.

Costco Wholesale COST has an Earnings ESP of +0.62% and a Zacks Rank #3.

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