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Here's All You Should Note Ahead of Kohl's (KSS) Q1 Earnings

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Kohl's Corporation (KSS - Free Report) is scheduled to release first-quarter fiscal 2019 results on May 21. This department store retailer boasts a splendid earnings surprise record, beating the Zacks Consensus Estimate by average of 10.7% in the trailing four quarters. Kohl’s has been gaining from sturdy comparable store sales (comps) run.

Let’s see if the company will keep its momentum alive in the quarter to be reported.

Kohl's Corporation Price and EPS Surprise



Kohl's Corporation Price and EPS Surprise

What to Expect?

The Zacks Consensus Estimate for first-quarter earnings has gone down by a notch in the past 30 days to 68 cents, which indicates an increase of 6.3% from the year-ago quarter’s reported figure. However, the consensus mark for revenues is $4,118 million, implying a drop of 2.1% from the year-ago quarter’s reported figure.

Solid Comps & Growing E-commerce Business

We expect comps to remain strong, and thereby aid the company’s performance in the quarter to be reported. Kohl’s has been making robust efforts to draw shoppers and improve sales, which have helped it deliver positive comps for six straight quarters now. Comps are likely to gain on strength in both store and digital channels, courtesy of the company’s robust marketing endeavors and product assortments. Competitor store closures should also facilitate market share growth in the said period.

Further, the Greatness Agenda, and focus on boosting traffic and enhancing operational excellence will likely fuel comps. Notably, the Greatness Agenda initiative was designed to drive transactions per store and sales. Apart from this, Kohl’s is expected to benefit from its e-commerce business. To this end, solid endeavors to boost mobile traffic, expand e-commerce fulfillment centers and strengthen in-store pickups bode well for the company. This apart, Kohl’s has been strengthening ties with retail giant Amazon (AMZN - Free Report) to drive traffic. The company has started accepting returns for Amazon customers on select products, and it will also provide free packing and shipping services for the merchandise to Amazon’s fulfillment centers. This move followed Kohl's decision to sell Amazon devices, accessories and smart home devices in selected stores in Los Angeles and Chicago. This store-within-store concept is expected to boost traffic and contribute to sales.

Will Cost Worries be Offset?

Kohl’s is vulnerable to the impact of rising selling, general and administrative (SG&A) expenses. SG&A expenses are expected to increase in fiscal 2019. This raises concerns for the company’s profitability in the quarter to be reported. Nevertheless, we expect this to be compensated by the aforementioned sales drivers and Kohl’s solid inventory management efforts that are set to drive gross margin.

What the Zacks Model Unveils

Our proven model doesn’t show a beat for Kohl's this 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 carries a Zacks Rank #3, its Earnings ESP of -4.68% makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Poised to Beat Earnings Estimates


TJX Companies (TJX - Free Report) has an Earnings ESP of +0.79% and a Zacks Rank #2.

Target (TGT - Free Report) has an Earnings ESP of +0.42% and a Zacks Rank #2.

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