Kohl’s disappoints in Q3; trims outlook again

Kohl’s Corp. cut its full-year guidance for the second time this year after falling short of sales and profit estimates.

Net income fell to $123 million, or 78 cents per share, for the quarter ended Nov. 2, compared with $161 million, or 98 cents a share, a year ago. Excluding one-time items, Kohl’s earned 74 cents per share, missing analysts’ expectations for 86 cents.

Net sales fell to $4.36 billion from $4.37 billion a year ago, missing expectations for $4.4 billion. Same-store sales rose 0.4%, also missing expectations. 

In a statement, CEO Michelle Gass put a positive spin on the quarter, focusing on the chain’s return to same-store sales growth for the first time this year. 

“The quarter started off positive in August with another successful back-to-school season and ended strong in October,” she added. “We enter the holiday period with momentum and are strategically increasing our investments. We believe that investing in the short-term will support our strategies to drive profitable growth over the long-term."

Kohl’s has launched a number of initiatives to boost traffic, from new private brands (the most recent being a home goods line designed by HGTV’s ‘Property Brothers’ stars Drew and Jonathan Scott) to the rollout of Amazon return counters across all its stores. It also is testing in-store pop-ups, Curated by Kohl’s, feature emerging brands in about 50 locations.  

On the chain's quarterly earnings call, Gass said the Amazon program was attracting new shoppers that are “younger than the typical Kohl’s customer.”  She remained upbeat about the upcoming holiday season.

“We will have Amazon Returns in stores nationwide this holiday for the first time, which will drive additional traffic into our stores," she added. "Second, we have more new brand launches than ever before." 

In comments, analyst Neil Saunders said the fact that Kohl’s, unlike, some other retailers in its segment, has not been afraid to experiment and to commit to things that help make it relevant and meaningful to consumers.  This puts the company in a good position, even if it is in a difficult part of the retail market.

“Taken alone, none of these things will push Kohl’s sales numbers into the stratosphere but taken together they put some wind beneath the company’s wings,” added Saunders, managing director, GlobalData Retail. “Moreover, they show that management has a clear vision of the future and what Kohl’s needs to do in order to be successful. (For more commentary, click here.)

For the year, Kohl's expects adjusted earnings per share of $4.75 to $4.95, down from previous guidance of $5.15 to $5.45.