Kohl's earnings miss estimates, sending the retailer's shares lower

Key Points
  • Kohl's saw "strong results" during the back-to-school shopping season.
  • The middle of the latest quarter was "soft," however, due to abnormal weather conditions, Kohl's said.
  • Kohl's stock is down more than 17 percent in 2017.
A Kohl’s department store in Jersey City, New Jersey.
Getty Images

Kohl's on Thursday posted a lower-than-expected quarterly profit, hampered by higher costs and several devastating hurricanes.

The middle of the latest quarter was "soft" due to abnormal weather conditions, Kohl's said. Merchandising expenses also increased.

Kohl's shares were falling around 1 percent Thursday afternoon on the news.

Net income dropped to $117 million, or 70 cents per share, in the fiscal third quarter, compared with $146 million, or 83 cents a share, one year ago. Analysts were expecting Kohl's to earn 72 cents per share, adjusted, according to a Thomson Reuters survey.

Kohl's quarterly sales were $4.33 billion, slightly higher than a year ago and outpacing analysts' estimate of $4.30 billion.

While the Wisconsin-based chain saw "strong results" during the back-to-school shopping season, helped by sales of kids clothing, footwear and active wear, September sales were "weak." But Kohl's is hopeful still ahead of the holidays.

"Both apparel and footwear categories in active were strong, and this was driven by large increases in both Nike and Adidas as well as continued strong performance from Under Armour," Chief Executive Kevin Mansell said on a call with analysts and investors.

"We continue to gain market share in active, we expect a very strong holiday performance in both active apparel and footwear categories," he added.

On Thursday, Kohl's raised its earnings outlook for fiscal 2017 after reporting a surprise increase in same-store sales.

"We are pleased to report an increase in comp sales for the quarter as the traffic momentum we saw in the first half of the year continued," Chief Executive Kevin Mansell said in a statement. "The quarter closed with strong sales in the second half of October."

Kohl's quarterly same-store sales climbed 0.1 percent, while analysts surveyed by Thomson Reuters were expecting a decline of 0.7 percent. This marks Kohl's first increase in the closely watched sales comps in seven quarters.

"While a comparable sales rise of 0.1% may be meager, the fact that it brings to an end an extended period of decline is significant," GlobalData Retail Managing Director Neil Saunders wrote in a note to clients.

"This new-found sales stability comes largely from Kohl's efforts to increase customer traffic at its stores, something it has achieved by improving the mix of products," Saunders added. "The decision to focus on health and wellness, for example, has paid dividends, with brands like Under Armour proving to be a popular addition among both existing and new customers."

Looking to the full year, Kohl's projected adjusted earnings to range from $3.60 and $3.80 a share versus a prior expected range of $3.50 to $3.80.

The retailer has been looking for ways to lure shoppers back to its locations, having recently landed a deal with internet giant Amazon to sell some of its tech gadgets and accept Amazon returns in a handful of stores.

On Thursday, Mansell said about the Amazon partnership: "The objective from our perspective is very simple and very straightforward. We believe both of these tests have the potential to drive incremental traffic to our stores, which as you know is our number one priority."

As of Wednesday's market close, Kohl's stock has lost a little more than 17 percent in 2017.

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