Kohl’s Q2 profit plunges but beat estimates; planning ‘conservatively’

Kohl’s Corp. reported better-than-expected second-quarter results but offered a sobering assessment of the months ahead.

“Our organization continues to navigate through a period of extraordinary change and uncertainty presented by the COVID-19 crisis,” CEO Michelle Gass stated. “As we look ahead, we are planning for the crisis to continue to impact our business in the near-term.”

On the chain’s quarterly earnings call, Gass told analysts that the company is planning “conservatively” for the remainder of 2020. At the same time, Kohl's sees an opportunity to steal market share as some retailers go bankrupt and close locations, in some cases liquidating their entire portfolio.

“We’re really set up to capture what will be billions of dollars market share opportunity in the future,” Gass said during the call.  “Even in the midst of the pandemic, we are acquiring new customers and see great potential looking forward."

Gass told the analysts that Kohl's in increasing its investment in locations where competitors are closing stores.

Kohl’s net income fell 80% to $47 million, or 30 cents a share, in the quarter ended Aug. 1, from $241 million, or $1.51 a share, in the year-ago period. On an adjusted basis, the retailer lost $0.25 a share, which was better than the loss of $0.83 cents forecast by analysts. 

“During the second quarter we made significant progress in rebuilding our business,” Gass stated. “We reopened all of our stores with new safety and operating procedures, accelerated digital growth, and showed great discipline in managing inventory and expenses meaningfully lower. In doing so, we generated positive operating cash flow and further enhanced our financial position.”

Total revenue fell 23.1% to $3.41 billion, but beat Street estimates of $3.09 billion. Online sales, which made up 41% of total sales during the quarter, jumped 58%. Kohl’s did not report same-store sales due to the pandemic.

Kohl’s gross profit margin shrank to 33.1% from 38.8% a year ago, due to increased shipping costs for online orders and increased promotions.

The retailer ended the quarter with $2.4 billion in cash on hand, and $500 million of availability on its credit revolver.

"We are well-positioned to capitalize on evolving customer behaviors and the retail industry disruption, which we believe will drive long-term growth and increased market share,” Gass said.