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Here's Why Kohl's (KSS) Stock Looks Appealing Post Q4 Results

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Kohl's Corporation (KSS - Free Report) is surely worth a shot, given its robust sales-driving endeavors, which helped the company put up a superb show in the recently reported fourth-quarter fiscal 2018 results. Notably, shares of the company have gained more than 3% since it reported results on Mar 5. Further, this Zacks Rank #2 (Buy) stock has rallied almost 13% in the past three months, against the industry’s decline of 0.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Let’s delve deeper into Kohl's growth story.

Solid Comps Fuel Q4 Results, View Looks Impressive

Kohl’s has been gaining from its sturdy comparable store sales (comps) trend, which continued to fuel performance in the fourth quarter of fiscal 2018, thereby encouraging management to provide an impressive outlook for fiscal 2019. Kohl’s has been making robust efforts to draw shoppers and improve sales. These endeavors have helped the company deliver positive comps for six straight quarters now. Incidentally, comps registered an increase of 1% in the fourth quarter, largely buoyed by a solid holiday season performance. Comps benefitted from strength in both store and digital channels, reflecting the company’s robust marketing endeavors and product assortments.

Competitor store closures also aided sales growth in the said period and are expected to remain a tailwind to market share growth. Further, we note that Kohl’s comps have been gaining from the company’s Greatness Agenda initiative, and focus on boosting traffic and enhancing operational excellence.

Coming back to fourth-quarter performance, both top and bottom lines came ahead of the Zacks Consensus Estimate. The bottom line also improved year over year. Notably, this marked the company’s seventh straight quarter of revenue beat, while earnings surpassed the consensus mark for the fifth time in a row. Kohl’s is focused on boosting traffic and expects comps growth to be flat to up 2% in fiscal 2019. Further, management expects adjusted earnings per share of $5.80-$6.15 compared with $5.60 recorded in fiscal 2018.

Kohl's Corporation Price, Consensus and EPS Surprise

E-Commerce Business Looks Strong

The company has experienced significant growth in its e-commerce business since the last few years. Markedly, digital sales witnessed double-digit increase during the fourth quarter, on the back of favorable impacts from the company’s customer-centric investments. Notably, mobile sales continued to be a significant driver, forming more than 50% of the company’s digital sales and about 70% of traffic improvement. We note that the company’s endeavors to boost mobile traffic have augmented the adoption of the Kohl app, making it a vital constituent of online sales. Moreover, in order to improve its online offerings, Kohl’s has been expanding its e-commerce fulfillment centers.

Other efforts to bolster digital sales include Smart Cart, BOPIS, Your Price and personalized search. Also, Kohl’s is on track to consolidate its call centers that provide support services to the company’s online and Kohl’s Charge customers.

Inventory Management Efforts Boost Margins

Kohl’s efficient inventory management involves four key strategies, which have been helping the company achieve cleaner inventory levels. In this regard, Kohl’s standard to small initiative has been lowering inventory and boosting profitability. Further, the company’s localization efforts have enabled it to bring the appropriate product in the apt store at the right time. Moving on, Kohl’s is gaining from its speed initiative, which facilitates improved flow of receipts in order to match demand. Finally, Kohl’s concentrates on strategically lowering consumer choices, while augmenting depth in core products. Such efforts have been leading to per store inventory reductions for 12 straight quarters now, aiding the gross margin, in turn.

In fourth-quarter fiscal 2018, the company’s inventory per store decreased 2% that helped gross margin expand 1 basis point (bp) even amid headwinds like unfavorable mix stemming from increased digital sales penetration. In fiscal 2019, gross margin is likely to rise up to 10 bps year over year.

These factors along with focus on partnerships and innovation are likely to help Kohl’s keep its solid momentum alive.

Looking for More? Check These Solid Retail Stocks

Foot Locker (FL - Free Report) , with a Zacks Rank #1, has long-term earnings per share growth rate of 9.2%.

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Boot Barn Holdings (BOOT - Free Report) , with long-term earnings per share growth rate of 20.7%, flaunts a Zacks Rank #2.

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