Kohl’s Corporation (KSS) reported mixed second-quarter fiscal 2024 results, with earnings exceeding expectations but sales falling short. While the company saw a rise in earnings per share, driven by improved gross margin and efficient inventory and expense management, revenue declined year-over-year. This was attributed to a challenging consumer environment, where customers became more selective with their spending. This resulted in lower overall sales despite an increase in transaction frequency.
Despite these headwinds, Kohl’s saw positive performance in key growth areas such as Sephora, home decor, gifting, and impulse purchases. The company remains optimistic about its growth trajectory, particularly with the upcoming partnership with Babies ‘R’ Us.
In terms of financial performance, Kohl’s posted earnings of 59 cents per share, surpassing the Zacks Consensus Estimate of 46 cents. Total revenues came in at $3,732 million, down from the prior-year quarter’s level of $3,895 million. Net sales fell 4.2% year over year to $3,525 million, missing the Zacks Consensus Estimate of $3,802.2 million. Comparable sales declined 5.1% year over year.
Kohl’s saw a positive gross margin expansion of 59 basis points (bps) to 39.6%. SG&A expenses dropped 4.2% to $1,250 million, representing a 1 basis point decrease as a percentage of total revenues. This resulted in an operating income of $166 million, up from $163 million in the year-ago period, with the operating income margin expanding by 26 bps to 4.4%.
Looking forward, Kohl’s revised its sales outlook downward while raising its earnings guidance for fiscal 2024. The company forecasts a net sales decline of 4-6%, a revision from the previous expectation of a 2-4% decline. Comparable sales are projected to decline 3-5% compared with the earlier forecast of a 1-3% decline. The operating margin is expected to range from 3.4% to 3.8% compared with the prior estimate of 3-3.5%. Management anticipates earnings per share to be between $1.75 and $2.25, revising the earlier forecast of $1.25 to $1.85.
Despite the challenges, Kohl’s remains focused on executing its growth strategy. With a strong balance sheet and a commitment to strategic partnerships, the company is poised to navigate the current retail landscape and capitalize on emerging opportunities.
