Kohl’s, Inc. reported a surprise profit in its fiscal first quarter of 13 cents a share. Analysts were calling for a loss of 43 cents. Comparable sales decreased 4.3 percent and overall sales were slightly ahead of analyst targets.
- Net sales decreased 3.3 percent and comparable sales decreased 4.3 percent;
- Gross margin increased 67 basis points;
- Diluted earnings per share of $0.13;
- Inventory declined 6 percent;
- Affirms full-year 2023 financial outlook; and
- Remains committed to strengthening the balance sheet and maintaining current dividend.
Tom Kingsbury, Kohl’s CEO, said “Our first quarter results were in line with our expectations and represented a first step as we work to drive sales and earnings performance over the long term. We delivered margin expansion, as well as a 6 percent reduction in inventory. In addition, our store’s business achieved productivity gains and Sephora at Kohl’s continued its sales momentum.”
“We are making progress against each of our key 2023 priorities, enhancing our customer experience, simplifying our value strategies, managing inventory and expenses with discipline, and strengthening our balance sheet. I would like to thank the entire Kohl’s team for driving against these priorities with a clear focus and strong determination. While there is still work to be done and the macroeconomic environment remains challenging, we are affirming our 2023 guidance and continue to have conviction in Kohl’s longer-term opportunity,” Kingsbury continued.
First Quarter 2023 Results
- Net sales decreased 3.3 percent year-over-year, to $3.4 billion, with comparable sales down 4.3 percent;
- Gross margin as a percentage of net sales was 39.0 percent, an increase of 67 basis points;
- SG&A expenses decreased 4.2 percent year-over-year, to $1.2 billion. As a percentage of total revenue, SG&A expenses were 34.7 percent, a decrease of 13 basis points year-over-year;
- Operating income was $98 million compared to $82 million in the prior year. As a percentage of total revenue, operating income was 2.8 percent, an increase of 55 basis points year-over-year;
- Net income was $14 million, or 13 cents per share. This compares to a net income of $14 million, or 11 cents per share in the prior year;
- Inventory was $3.5 billion, a decrease of 6 percent year-over-year; and
- Operating cash flow was a used ($202) million.
2023 Financial and Capital Allocation Outlook
For the full year 2023, the company affirms its financial outlook and currently expects the following:
- Net sales: A decrease of (2 percent) to (4 percent), including the impact of the 53rd week which is worth approximately one percent year-over-year;
- Operating margin: Approximately 4.0 percent;
- Diluted earnings per share: In the range of $2.10 to $2.70, excluding any non-recurring charges;
- Capital Expenditures: $600 million to $650 million, including expansion of its Sephora partnership and store refresh activity;
- Dividend: On May 10, 2023, Kohl’s Board of Directors declared a quarterly cash dividend on the company’s common stock of $0.50 per share. The dividend is payable June 21, 2023 to shareholders of record at the close of business on June 7, 2023; and
- Debt Reduction: The company retired $164 million of bonds that matured in February 2023, and expects to retire $111 million of bonds maturing in December 2023.
Photo courtesy Kohl’s