Kohl's Smashes Fourth-Quarter Sales and Earnings Estimates

Kohl’s reports better-than-expected fourth-quarter earnings and sales and reinstates its dividend as it continues to navigate through the pandemic.
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Kohl’s  (KSS) - Get Report on Tuesday reported better-than-expected fourth-quarter earnings and sales and reinstated its dividend as it continues to navigate through the pandemic with a long-term strategy to bring customers back to its physical and virtual stores.

Kohl's posted adjusted earnings of $346 million, or $2.22 a share, vs. $308 million, or $1.99 a share, in the comparable year-ago period. The results included a tax-benefit gain of $1.15 a share. Sales rang in at $6.14 billion vs. $6.83 billion a year ago. 

Analysts polled by FactSet expected the retailer to post fourth-quarter per-share earnings of $1.01 on sales of $5.88 billion. Kohl's itself said last month that it expected to post earnings of between $1 and $1.05 a share.

"After an extraordinary year managing through the pandemic, we ended the year in a very solid financial position, and we enter 2021 with strong momentum," CEO Michelle Gass said in a statement. ”

Kohl’s said it now expects full year 2021 net sales to increase in the "mid-teens percentage range" from the prior year, operating margin to be in the range of 4.5% to 5%, and earnings per share to be in the range of $2.45 to $2.95, excluding any non-recurring charges.

The company also said it was reinstating its dividend. 

Kohl’s board agreed to issue a quarterly cash dividend of 25 cents a share, payable March 31, to shareholders of record at the close of business on March 17. The company also expanded its share repurchase program to $300 million from $200 million.

Like other major U.S. retailers, Kohl’s struggled as the pandemic took hold in early 2020, though the retailer had faced struggles before the pandemic shuttered its doors, logging about a 1.3% drop in total revenue in the year ended February 2020.

However, Kohl’s shares have gained in recent weeks amid expectations that a group of activist investors including Macellum Advisors, Ancora Holdings and Legion Partners Asset Management will succeed in shaking up the company’s board and streamline its operations.

The group, which holds a roughly 9.5% stake, earlier this year nominated nine directors to join Kohl’s 12-person board. The activists have said they are looking to place experienced retailers on the board to work with CEO Michelle Gass, and want her to consider a sale-leaseback of some non-core real estate.

To be sure, Kohl's has its own turnaround plans in play. The company in December announced that beauty retailer Sephora will set up shop within Kohl’s stores, a move analysts see as catering to younger shoppers. Kohl's also inked a deal with Amazon.com  (AMZN) - Get Report last year to accept physical returns of Amazon packages in its stores.

Kohl's shares have rebounded since a disappointing third-quarter earnings report, rising about 80% since mid-November. At last check, Kohl's shares were up 1.47% at $57.83. 

Separately, Target  (TGT) - Get Report on Tuesday posted fourth-quarter earnings that topped estimates as sales jumped 21%, boosted by a strong holiday e-commerce sales.