386105

Kohl's (NYSE:KSS) Posts Q1 Sales In Line With Estimates But Stock Drops 19.8%


Anthony Lee /
2024/05/30 7:10 am EDT

Department store chain Kohl’s (NYSE:KSS) reported results in line with analysts' expectations in Q1 CY2024, with revenue down 5.3% year on year to $3.38 billion. It made a GAAP loss of $0.24 per share, down from its profit of $0.13 per share in the same quarter last year.

Is now the time to buy Kohl's? Find out by accessing our full research report, it's free.

Kohl's (KSS) Q1 CY2024 Highlights:

  • Revenue: $3.38 billion vs analyst estimates of $3.36 billion (small beat)
  • EPS: ($0.24) vs analyst estimates of $0.06 (large miss)
  • Lowered full year guidance across the board
  • Gross Margin (GAAP): 43.1%, up from 42.7% in the same quarter last year
  • Free Cash Flow was -$133 million compared to -$296 million in the same quarter last year
  • Same-Store Sales fell 4.4% year on year, in line with the same quarter last year (miss vs expectations of down 0.4% year on year)
  • Market Capitalization: $3.02 billion

Tom Kingsbury, Kohl’s chief executive officer, said, “Our first quarter results did not meet our expectations and are not reflective of the direction we are heading with our strategic initiatives. Regular price sales increased year-over-year, with early success in underpenetrated categories, positive trends in our Women’s business, and continued strong growth in Sephora. However, lower clearance sales versus last year represented a more than 600 basis point drag on comparable sales. Importantly, we were able to deliver gross margin expansion, manage inventory down 13% and tightly control expenses in the quarter.”

Founded as a corner grocery store in Milwaukee, Wisconsin, Kohl’s (NYSE:KSS) is a department store chain that sells clothing, cosmetics, electronics, and home goods.

Department Store

Department stores emerged in the 19th century to provide customers with a wide variety of merchandise under one roof, offering a convenient and luxurious shopping experience. They played an important role in the history of American retail and urbanization, and prior to department stores, retailers tended to sell narrow specialty and niche items. But what was once new is now old, and department stores are somewhat considered a relic of the past. They are being attacked from multiple angles–stagnant foot traffic at malls where they’ve served as anchors; more nimble off-price and fast-fashion retailers; and e-commerce-first competitors not burdened by large physical footprints.

Sales Growth

Kohl's is one of the larger companies in the consumer retail industry and benefits from economies of scale, enabling it to gain more leverage on fixed costs and offer consumers lower prices.

As you can see below, the company's revenue has declined over the last four years, dropping 3% annually as it failed to grow its store footprint meaningfully and observed lower sales at existing, established stores.

Kohl's Total Revenue

This quarter, Kohl's reported a rather uninspiring 5.3% year-on-year revenue decline to $3.38 billion in revenue, in line with Wall Street's estimates. Looking ahead, Wall Street expects revenue to decline 3.1% over the next 12 months.

Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefitting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.

Same-Store Sales

Kohl's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 5.6% year on year. This performance is quite concerning and the company should reconsider its strategy before investing its precious capital into new store buildouts.

Kohl's Year On Year Same Store Sales Growth

In the latest quarter, Kohl's same-store sales fell 4.4% year on year. This performance was more or less in line with the same quarter last year.

Key Takeaways from Kohl's Q1 Results

Kohl's missed significantly on same-store sales, leading to an EPS miss. The company then lowered its full year outlook across the board. Overall, this was a bad quarter for Kohl's. The company is down 19.8% on the results and currently trades at $21.88 per share.

Kohl's may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.