Kohl’s Q3 sales fall; reinstating dividend
Kohl’s Corp. swung to a loss in its third quarter as the pandemic continues to impact sales but the retailer still managed to top its own expectations amid online growth.
“Our third quarter results exceeded our expectations with significant sequential sales and profitability improvement said,” stated Michelle Gass, Kohl’s CEO. “Digital sales growth remained strong and our actions to improve our gross margin showed great progress.”
On the earnings call with analysts, Gass detailed plans for the company's expansion in two fast-growing ares: activewear and personal care.
Kohl’s reported a net loss of $12 million, or $0.8 per share, for the quarter ended Oct. 31, compared with net income of $123 million, or $0.78 per share in the year-ago period. Excluding one-time charges, Kohl’s earned $0.01 a share, which was better than the $0.43 loss analysts had expected, and a profit of $2 million.
Kohl’s net sales fell about 13% to $3.78 billion, missing analysts’ estimates of $3.86 billion. The metric showed significant improvement, however, from the retailer’s second quarter, when sales declined 22.9%.
Same-store sales, which include online, fell 13.3%. The retailer reported positive sales growth in its home and toys business along with athleisure.
Total revenue dropped 14% to $3.98 billion.
Gass noted that Kohl’s further strengthened its financial position and fully repaid its revolving line of credit during the period, “which underscores the solid cash flow generation of our business.” The chain plans to reinstate a dividend during the first half of 2021 after temporarily pausing it, as many other retailers did, at the beginning of the pandemic.
“We entered the holiday season well-positioned and prepared to serve our customers with more omnichannel conveniences in place to deliver the great experience they always expect from Kohl’s,” said Gass. “As we look ahead, we are incredibly focused on executing against our new strategic framework, which represents our greatest opportunity to drive long-term sales and profit growth and create shareholder value in the coming years.”
Kohl's new strategy includes less dressier apparel and a bigger focus on casual wear. It will launch a new athleisure brand for men and women, FLX, in March and plans to expand active from 20% to 30% of its business.
"Our vision is to be the most trusted retailer of choice for the active and casual lifestyle," Gass told analysts.
Kohl's initial outing with Land's End has seen early success, Gass said.
"We will continue to offer their full catalog online and we will be doubling the number of stores offering Lands’ End in 2021," she added.
Kohl’s is also testing in-store concept Wellness Market in 50 stores, which features personal care products, baby goods and pet items.