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Kohl's (KSS) to Post Q2 Earnings: Disappointment in Store?

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Kohl's Corporation (KSS - Free Report) is slated to release second-quarter fiscal 2019 results on Aug 20. This department store chain delivered a negative earnings surprise of close to 9% in the last reported quarter. It delivered average positive earnings surprise of 0.8% in the trailing four quarters.  

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

Kohl's Corporation Price and EPS Surprise

Kohl's Corporation Price and EPS Surprise

Kohl's Corporation price-eps-surprise | Kohl's Corporation Quote

What to Expect?

The Zacks Consensus Estimate for earnings in the second quarter has gone down, over the past 30 days, to $1.56, which suggests a decline of 11.4% from the year-ago period’s reported figure. The consensus mark for revenues is $4,490 million, indicating a drop of 1.8% from the year-ago quarter’s reported figure.

Factors to Influence Q2 Results

Kohl’s broke its solid comparable store sales (comps) growth trend in the last reported quarter due to inclement weather conditions, soft home category sales, and not-so-productive promotions amid intense competition. The company’s second-quarter results will likely reflect continuation of this lackluster scenario, wherein comps are projected to be weak.

Moreover, the company is vulnerable to high selling, general and administrative (SG&A) expenses. Higher store labor costs and logistic expenses to facilitate Amazon Returns may weigh on the upcoming quarterly results. Also, unfavorable mix and increased shipping costs are concerns.  To counter these cost-related woes and address the competition, the company is undertaking aggressive pricing and promotional actions, which, in turn, are disruptive to margins. These factors, along with tariffs on merchandise sourced from China, are threats to Kohl’s bottom line.

Nonetheless, strong sales-driving efforts are likely to offer some respite to the stock. To this end, Kohl’s has been focusing on undertaking innovation and strengthening its brands portfolio. Also, the company has been strengthening its ties with retail giant Amazon (AMZN) to drive traffic. Further, Kohl’s recent partnership with Fanatics is expected to bolster performance. This apart, the company’s robust digital efforts have been paying off and boosting its e-commerce business. We expect these factors to positively contribute to the company's performance in the quarter under review.

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.

Kohl's has an Earnings ESP of -2.48% and carries a Zacks Rank #4 (Sell). Notably, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement.

Stocks Poised to Beat Earnings Estimates

Caseys General Stores CASY has an Earnings ESP of +4.67% and a Zacks Rank #1.You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington BURL has an Earnings ESP of +0.35% and a Zacks Rank #2.

Target TGT has an Earnings ESP of +1.04% and a Zacks Rank #2.

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