Kohl’s Q4 income dips; CEO ‘confident’ about future growth

Kohl’s reported a mixed fourth quarter as earnings topped estimates and sales came up short. But the company gave an upbeat revenue outlook for 2022 and said it is doubling its dividend.

Despite supply chain, inflation and labor challenges, Kohl's noted that it achieved an operating margin goal of 8.6% — two years ahead of schedule.

Kohl’s posted net income of $299 million, or $2.20 per share, for the quarter ended Jan. 29, down from net income of $342 million, or $2.20 per share, in the year-ago period. Analysts had expected earnings per share of $2.10.

For the full year, Kohl’s reported record adjusted earnings per share of $7.33, exceeding the previous record of $5.60 in 2018.

Fourth-quarter revenue rose 5.8% to $6.50 billion from $6.14 billion last year, missing estimates of $6.60 billion. Digital sales accounted for 39% of net sales and were up 21% compared to the four quarter of 2019 but down 1% year over year,

Kohl’s is under pressure from activist investor Macellum Advisors, which is looking to take control of the department store’s board. The company has criticized Kohl’s in recent years for not performing as well as it could. In February, Kohl’s said it would reject the takeover offers it received, saying they undervalued the business. It also adopted a shareholder rights plan, commonly knowns as a “poison pill,” to avert a hostile takeover of its business.

“In 2021, we delivered all-time record earnings per share, significantly ahead of our expectations,” said CEO Michelle Gass. “Our operating margin of 8.6% exceeded our 2023 goal two years ahead of plan, a direct result of our efforts to restructure the business to be more profitable. We remain extremely confident in the future growth and cash flow generation of our business, and in 2022 will build on our momentum as we further scale key initiatives such as Sephora.”

Kohl’s has set a capital expenditures budget of approximately $850 million, including the expansion of its Sephora partnership. A quarter of the customers going to a Kohl's-based Sephora are new to Kohl's, with many of them younger and more diverse than the average Kohl's shopper, Gass told analysts on the company's earnings call. She called the partnership "game-changing."

[Read More: Kohl’s adding 400 in-store Sephora shops this year]

Kohl's is doubling its annual dividend to $2.00 per share. And the retailer is planning to repurchase at least $1 billion in shares in 2022, with $500 million expected to be repurchased in the second quarter.

“We continue to see a lot of value in our company,” Gass added. “We are reinforcing our commitment to driving shareholder value by doubling our dividend and planning on repurchasing at least $1 billion in shares in 2022.

For the full year, Kohl's is guiding for a sales increase of 2% to 3%, and EPS in the range of $7.00 to $7.50, excluding non-recurring charges. Analysts had forecast revenue of $19.11 billion, implying about 1.7% growth and EPS of $6.56.