Kohl’s Inc. reported earnings on an adjusted basis grew 12.3 percent in the fourth quarter to easily top Wall Street’s targets. Sales were down 10.1 percent.

Adjusted earnings reached $346 million, or $2.22, up from $308 million, or $1.99, a year ago. Wall Street’s consensus estimate had been $1.01. Adjusted earnings exclude impairments, store closing and other costs, gains on the sale of real estate, and gains on extinguishment of debt.

Net income totaled $343.0 million, or $2.20 per share, up from $265.0 million, or $1.72 per share, last year. Revenue of $6.141 billion fell from $6.832 billion but also beat Wall Street’s consensus estimate of $5.881 billion.

Gross margin eroded 73 basis points to 32.0 percent from 32.7 percent a year ago. Selling, general & administrative expenses declined 8.0 percent to $1.6 billion from $1.74 billion a year ago, while increasing slightly as a percent of sales to 26.1 percent from 25.5 percent.

For the year, adjusted earnings came to a loss of $185 million, or $1.21 a share, against earnings of $769 million, or $4.86, a year ago. The net loss in the year was $163 million, or $1.06, against earnings of $691 million, or $4.37, a year ago. Revenues were down 20.1 percent to $15.96 billion from $19.97 billion.

“After an extraordinary year managing through the pandemic, we ended the year in a very solid financial position, and we enter 2021 with strong momentum. We are pleased with the progress we are making against our strategic initiatives and we are set up to deliver a multi-year improvement in sales and operating margin. Several newly announced initiatives will come to life for our customers in the year ahead, most importantly the launch of our Sephora partnership in August,” said Michelle Gass, Kohl’s chief executive officer.

“We are committed to driving shareholder value and based on our strong financial outlook we are resuming our capital allocation strategy in 2021,” said Gass.

2021 Financial Outlook
The company currently expects full-year 2021 net sales to increase in the mid-teens percentage range as compared to the prior year, operating margin to be in the range of 4.5 percent to 5.0 percent, and earnings per share to be in the range of $2.45 to $2.95, excluding any non-recurring charges.

2021 Capital Allocation Strategy
The company plans to resume its capital allocation strategy in 2021, including increasing capital expenditures, reinstating dividends, resuming share repurchase programs, and employing liability management strategies.

  • Capital expenditures: $550 million to $600 million, including the launch of its Sephora partnership, the opening of its sixth e-commerce fulfillment center and store refresh activity.
  • Dividend: On February 24, 2021, Kohl’s Board of Directors declared a quarterly cash dividend on the company’s common stock of $0.25 per share. The dividend is payable March 31, 2021 to shareholders of record at the close of business on March 17, 2021.
  • Share repurchase program: $200 million to $300 million.

Photo courtesy Kohl’s