Weak sales and CEO shake-up send shares down

On November 27, 2024By Littum

Kohl’s Corp (NYSE:KSS) shares are trading lower after the company reported earnings for the third quarter.

The company reported a net sales decline of 8.8% year-over-year (Y/Y) to $3.507 billion, missing consensus of $3.638 billion. Comparable sales for the quarter fell 9.3%. Total revenue was $3.710 billion.

Gross margin for the quarter increased by 20 basis points to 39.1%. Operating income for the quarter was $98 million versus $157 million last year. The operating margin fell by 120 basis points to 2.7 per cent.

Selling, general and administrative expenses decreased 5.1% to $1.3 billion and SG&A expense margin was 34.8%, up 125 basis points Y/Y.

EPS was 20 centsmissing the analyst consensus estimate of 28 cents.

Inventory at the end of the quarter was $4.1 billion, down 3% from a year earlier. Kohl’s had $174 million in cash and cash equivalents per November 2. Operating cash flow was a spend of $195 million.

On November 13, 2024, Kohl’s board of directors declared a quarterly cash dividend of 50 cents per share. share payable on December 24 to shareholders registered per December 11.

Yesterday, Kohl’s revealed that CEO Tom Kingsbury resigns on 15 January 2025.

He will remain in an advisory role to the new CEO and will remain on the board until his retirement in May 2025, after which the size of the board will be reduced by one. The board has appointed Ashley Buchanan as CEO with effect from 15 January 2025.

Outlook: Kohl’s Revised FY24 EPS Outlook to $1.20 – $1.50 (from $1.75 – $2.25) versus Street View at $1.80.

Kohl’s Revised FY24 Growth Outlook to Decrease (7)% – (8)% from (4%) – (6%). The company now sees FY24 comparable sales decline of (6%) to (7%) versus (3%) to (5%) earlier.

Kohl’s now expects an FY24 operating margin of 3.0% to 3.2% (previously 3.4% – 3.8%) and continues to see capital expenditures of around $500 million, including expansion of its Sephora partnership and other store-related investments .

Tom Kingsbury, Kohl’s CEO, said: “Our third quarter results fell short of our expectations as sales remained low in our apparel and footwear businesses. Although we had a strong collective performance across our key growth areas, including Sephora, Home Furnishings , gifts and impulse, and also benefited from the opening of Babies “R” Us stores in 200 of our stores, these were unable to offset the decline in our core business.”