The department store retailer, Kohl’s (KSS, Financial), registered a growth of 6.7% in its share price. The company posted its third-quarter results, wherein both the top line and the bottom line were below the Street’s expectations. However, this is not the first time that the company missed the estimates. It missed the expectations in two out of the last four quarters. This resulted in a sharp decline in its share price.
The misses
Revenue dropped to $4.37 billion as compared to $4.44 billion in last year’s quarter. The top line was also below the analysts’ estimate of $4.4 billion. The retailer had already warned about its results in October when it witnessed sluggish sales at its stores. Its same-store sales declined 1.8% during the quarter. This was worse than last year’s fall of 1.6% in comp sales. Factors such as lower footfall in stores, decline in consumer spending and warmer than usual weather affected the top line.
However, the company had five more stores as compared to the last year’s quarter. Kohl’s is focusing on opening new stores as well as remodeling the existing ones. Hence, it was expected to register higher sales. But warmer weather conditions resulted in lower demand for outerwear.
Further, earnings for the quarter dropped to $0.70 per share as against the bottom line of $0.81 per share in the previous year. Also, it was lower than the estimate of $0.74 per share. Gross margins also shrank 30 basis points to 37.2%, despite a decline in costs. This was mainly due to lower revenue of the company.
Efforts to consider
The company is making efforts to expand its ecommerce business which grew 30% over last year. Online shopping has become very popular and customers mostly prefer to make their purchases online. Thus, it has added new services such as buying goods online and picking it up in nearby stores. Even peers such as Macy’s (M, Financial) have introduced such services which have gained popularity among customers. However, even Macy’s witnessed lower demand, especially during the warm September and October months.
Kohl’s has also introduced a new program called the customer loyalty program, which is quite an important move for the company. The program provides $5, as loyalty points, to the customers for every $100 spent. This resulted in higher customer visits. Thus, customers having such cards made two extra visits and spent $80 extra because of this program. Also, a total of 17 million customers have enrolled in this program, which is remarkable.
Final words
Thus, Kohl’s too is making impressive moves to attract customers. But, it reduced its earnings estimate to the lower end of the guidance range of $4.05 per share to $4.45 per share. This is mainly because of higher expenses related to discounts and promotions in the upcoming quarter. However, sales are expected to be high due to higher demand in the peak holiday season. Moreover, comp sales are expected to grow between 2% and 3% during the fourth quarter. In addition, the company made share repurchases, which delighted the investors. Hence, these factors indicate that a bright quarter awaits the retailer. Investors should keep an eye on this company.
