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Department store chain Kohl’s Corp. (NYSE: KSS ) is working hard to increase store traffic and revive sales, after losing business to online retailers and being hurt by the economic downturn. As we enter the new fiscal year, the company’s priority is to strengthen its balance sheet and reduce debt through efficient capital allocation.
Stock Dips
The stock experienced a major sell-off in mid-2022, and has yet to recover. The main reason for the dismal performance is the pressure caused by inflation on the spending power of consumers. Those challenges will persist this year and possibly beyond, making the stock a risky investment. We recommend waiting until a clear picture emerges, before investing.
Read management/analyst commentary on monthly reports
Currently, Kohl’s is regularly evaluating its real estate to maximize asset value, target long-term profitability, and optimize its portfolio. At the same time, take steps to increase traffic through partnerships and renovate stores to improve customer experience.
Q4 Report Because
On average, analysts expect Kohl’s fourth-quarter earnings to be $0.98 per share, well below the $2.2/share profit the company recorded a year earlier. Signaling broad-based weakness, sales are expected to decline 3.5% to around $6 billion. The company will publish the results on March 1, before regular trading begins.
In the third quarter, adjusted earnings beat estimates after two consecutive crashes, but fell 50% to $0.82 per share. The decrease can be attributed mainly to a 7% decrease in net sales to $4.28 billion. Meanwhile, management dropped its quarterly financial guidance and retracted its previously published full-year outlook, citing macroeconomic uncertainty and an unexpected CEO transition.
Earnings: Walmart Q4 results beat estimates; The US increased by 8.3%
From Kohl’s Q3 2022 earnings conference call:
“Looking forward, our capital allocation action will prioritize dividends, followed by the return of our balance sheet to its historical strength. We plan to pay down our two maturities of bonds totaling $275 million in 2023. We are not planning to repurchase additional shares until our balance sheet is strengthened on the way to our leverage target of 2.5 times. We use the $500 million ASR that was recently completed as a fallback from 2023.
Change Leadership
Kohl’s is preparing for a major leadership change – the departure of chief executive Michelle Gass later this year to join other companies. Director Tom Kingsbury will serve as interim chief executive officer until the company finds a new chief.
On Friday, the stock traded below $30 and lost again during the session. Currently, KSS is trading close to what it was six months ago, swimming in several years.
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