Kohl’s sees Q4 sales down but earnings to top Street; cites gaining momentum

Kohl's Corp. reported better-than-expected earnings and strong digital sales in a preliminary look at its fourth-quarter performance.

The department store retailer said it expects fourth-quarter earnings to be in the range of $1.00 to $1.05 per share (before considering any impact from tax planning), compared to $1.72 per share in the year-ago quarter. Analysts were expected earnings of $0.70 per share.

Sales are expected to fall 10%, greater than the 8.9% decline analysts had expected. Digital sales rose more than 20%, accounting for more than 40% of net sales

Comparable sales are expected to decline 11%, also more than expected. It was the chain’s third consecutive quarter of sequential improvement.

“Our fourth-quarter performance exceeded our expectations across all key metrics with sales strengthening as we moved through the period," said CEO Michelle Gass in a statement. “Our focus on gross margin showed further traction and we managed expenses tightly, which together strengthened our financial position.”

Kohl’s said that its focus on strong expense and inventory management and increased optimization in promotional strategies helped drive its earnings and strengthen its position as it heads into the new year. 

“As we carry this momentum into 2021, we are confident that our key strategic initiatives will accelerate our top-line growth and expand our operating margin,” she said. “Our partnership with Sephora will launch this fall in 200 stores and online, commencing a multi-year buildout that will drive significant growth for Kohl’s."

Kohl's stock was upgraded on Wednesday at Cowen & Co. based on its upcoming partnership with Sephora and its women's apparel revamp.

The company will report fourth-quarter earnings on March 2.