Kohl's (KSS) Reports Balanced Earnings and a Cautious Full-Year Outlook

Family-oriented department store chain Kohl's (KSS) reported fairly lackluster earnings last week, raising investor concerns that previous earnings from Wal-Mart (WMT) and Macy's (M) were only precursors to a weakening consumer environment. The company, which operates stores om 49 states across the United States, reported a profit of $231 million, down 3.5% from $240 million in the prior year quarter.

On a per-share basis, earnings rose from $1.00 to $1.04, due to a decline in the number of outstanding shares during the quarter. Revenue increased 2% to $4.29 billion, and same-store sales rose 0.9% Daily Chart
Kohl's earnings were perfectly in line with its previous forecast for earnings between $1.00 to $1.08 per share and a revenue increase between 1% to 3%. Same-store sales, however, came up short of the 2% growth that it had previously expected. Looking forward into the third quarter, Kohl's forecasts earnings between $0.83 to $0.92 per share on a top line increase between 1% to 3%. Analysts polled by Thomson Reuters expect the company to earn $0.94 per share on 1% sales growth. For the full year, Kohl's outlook was similarly cautious -- lowering its per-share earnings forecast for the full year from $4.15-$4.45 to $4.15-$4.35. That uncertain outlook reflected the lowered full-year projections from many of its industry peers. It also reflects grave uncertainty regarding its key back-to-school season -- the retail industry's second most important season after the November to December holiday season. In addition, a cooler, wetter, earlier fall has also been factored in to its outlook. Despite the company's cautious view, many analysts see Kohl's earnings as robust compared to Macy's and Wal-Mart, and an indicator that consumer spending may not be as weak as previously forecast. Kohl's sells apparel, footwear and accessories for women, men and children, home products and housewares. The company has also expanded its e-commerce operations in recent years, adding exclusive online products that weren't available at its brick-and-mortar locations. During the quarter, gross margin edged up from 39.0% to 39.1% although input costs climbed 2%. It increased its store count 1.9% to 1,155 locations. Selling, general and administrative (SG&A) expenses increased 2.6%. Shares of Kohl's have remained flat over the past twelve months. The stock trades at 11 times forward earnings with a 5-year PEG ratio of 1.86, indicating limited downside but throttled growth potential going forward. The company also pays a quarterly dividend of $0.35 per share -- a 2.7% yield at current prices. Other News About KSS Kohl's Unveils New Exclusive Collection of Athletic Apparel to Support Women's Health Kohl's releases a new line of athletic apparel for a good cause. Kohls Chairman Sells 300K Shares and 4 Insider Sales to Note Should you worry about these insider sales at Kohl's? Other Stocks in the News A Closer Look at the Market for Home and Lab HIV Tests Are HIV home tests gaining widespread acceptance? These 2 Retail Stocks Are Bucking the Trend How did Urban Outfitters and Estee Lauder escape the downturn in discretionary spending? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Aug 26, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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