January Sales Weigh on Kohl's Corporation (KSS) Guidance

NEW YORK (TheStreet) -- Kohl's Corporation (KSS), in its fourth-quarter update Thursday, said comparable-store sales for the January-ended quarter decreased 2%, though an increase of 0.8% over a combined November and December, the critically-important holiday shopping season for the retailer.

For the time being, investors concerned with how the retailer would fare over this holiday season's cutthroat, aggressively-competitive environment have been reassured. At competitor Sears (SHLD), for instance, its namesake stores suffered a 9.2% decrease in comparable-store sales through to Jan. 6.

However, the department store chain warned of significantly lower January sales, resulting from lower traffic and low levels of clearance merchandise.

Additionally, unexpected expenses servicing its e-commerce website increased costs over the quarter, though specifics were not detailed.

As a result of higher-than-anticipated costs and lower sales last month, the company revised its per-share earnings estimate to $1.53 from prior guidance of $1.59 to $1.74. Analysts surveyed by Thomson Reuters had expected earnings of $1.63.

For the full year, management anticipates net income of $4.03 a share, downwardly revised from previous guidance of $4.08 to $4.23. Analysts had forecast $4.12 a share.

The Wisconsin-based business will release fourth-quarter and full-year results on Feb. 27.

By mid-morning, shares were up 4.6% to $52.14.

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TheStreet Ratings team rates KOHL'S CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate KOHL'S CORP (KSS) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has significantly increased by 108.26% to $252.00 million when compared to the same quarter last year. In addition, KOHL'S CORP has also vastly surpassed the industry average cash flow growth rate of -21.57%.
  • The debt-to-equity ratio is somewhat low, currently at 0.82, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.16 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 2.4%. Since the same quarter one year prior, revenues slightly dropped by 1.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

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