Kohl's stock rises despite fourth-quarter revenue miss and weak guidance

By James Rogers

Kohl's recognizes that 'the macroeconomic environment remains uncertain,' according to Chief Financial Officer Jill Timm

Kohl's Corp. shares rose 2.6% Tuesday after initially falling in premarket trading, weighed down by the department-store chain's weaker-than-expected fourth-quarter revenue and weak guidance.

Kohl's (KSS) reported net income of $186 million, or $1.67 per share, after a net loss of $273 million, or $2.49 per share, in the same period last year. The FactSet consensus was for earnings of $1.28 a share.

Fourth-quarter revenue was $5.71 billion, down from $5.775 billion in the prior year's quarter. The fourth quarter of 2023 also included approximately $164 million from the 14th week. Analysts surveyed by FactSet were looking for sales of $5.802 billion.

"2023 represented an important year for Kohl's. We enhanced our store experience, expanded our partnership with Sephora, and invested in underpenetrated categories," Kohl's Chief Executive Tom Kingsbury said in a statement, adding that the company also simplified its value strategies and implemented new inventory-management processes. "Our store business had its best comparable sales performance since 2010, Sephora at Kohl's continued to drive meaningful beauty sales growth, and we managed inventory down 10% at year end," he added. Kohl's ended the year with more than 1,100 stores.

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Speaking during a conference call to discuss the results, Kingsbury said that Kohl's ended 2023 with a Sephora presence in 910 of the company's stores. Kohl's plans to open approximately 140 smaller-format Sephora shops in 2024 and to extend Sephora to the remainder of Kohl's stores in 2025, he said.

Kohl's gross margin was 32.4%, an increase of 937 basis points on the prior year's quarter. Comparable sales decreased 4.3%. Analysts surveyed by FactSet were looking for a comparable sales decrease of 3.1%.

The retailer also gave weaker-than-expected full-year guidance. For 2024, Kohl's expects sales between $16.434 billion and $16.766 billion, and earnings between $2.10 and $2.70 a share. The FactSet consensus is for revenue of $16.795 billion and earnings of $2.62 a share.

Speaking during the conference call, the company's chief financial officer, Jill Timm, said Kohl's recognizes that "the macroeconomic environment remains uncertain."

Related: Kohl's stock drops after profit tops expectations but same-store sales miss

"Looking ahead, we are incredibly focused on delivering comparable sales growth in 2024," Kingsbury said in the statement. "Our strategic initiatives are positioned to build momentum and contribute more meaningfully, and we will partner with Babies 'R' Us to meaningfully expand our presence in the baby gear category which represents a compelling white space opportunity for Kohl's."

The company expects 2024 comparable sales in the region of 0% to 2%. Analysts surveyed by FactSet are looking for full-year comparable sales growth of 1.3%.

Kohl's shares have risen 8.8% in the last three months, compared with the S&P 500 index's SPX gain of 10.3%.

-James Rogers

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03-12-24 0954ET

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