Kohl's stock climbs as profit beat and raised outlook offset another sales miss

By Tomi Kilgore

Revenue missed expectations for the fifth straight quarter, as 'customers exhibited more discretion in their spending'

Shares of Kohl's Corp. climbed Wednesday, after the department store chain reported fiscal second-quarter profit that beat expectations, to help offset another revenue miss amid continued softness in the core business.

"During the second quarter, we attracted more new customers to Kohl's and experienced an increase in overall transactions, both of which are positive developments," said Chief Executive Tom Kingsbury, according to an AlphaSense transcript of the post-earnings call with analysts. "At the same time, however, our customers exhibited more discretion in their spending, which pressured overall sales and overshadowed a strong performance in our key growth areas, including Sephora, home decor, gifting and impulse."

The stock (KSS) ran up 7.2% in morning trading. It has now bounced 10.8% since closing at a 10-month low of $18.96 on Aug. 22.

Net income for the quarter to Aug. 3 rose to $66 million, or 59 cents a share, from $58 million, or 52 cents a share, in the same period a year ago. That beat the FactSet consensus for earnings per share of 44 cents.

That marks a big improvement from just three months ago, when the company reported a surprise first-quarter loss to send the stock tumbling to a record one-day loss of 22.9%.

Total revenue fell 4.2% to $3.73 billion, below the FactSet consensus of $3.81 billion. That marked the fifth straight quarterly revenue miss, and the 10th miss in the past 11 quarters.

Cost of sales fell more than revenue, down 5.1% to $2.13 billion, to boost gross margin to 39.6% from 39.0%.

Comparable sales, or sales of stores open at least a year, dropped 5.1% compared with expectations of a 1.8% decline.

For the full year, Kohl's raised its guidance range for EPS to $1.75 to $2.25 from $1.25 to $1.85 but cut its comparable sales outlook to a decline of 3% to 5% from a decrease of 1% to 3%, and lowered its sales growth guidance to negative 4% to 6% from a decrease of 2% to 4%.

The stock has tumbled 26.7% year to date, while the SPDR S&P Retail ETF (XRT) has gained 6.6% and the S&P 500 index has advanced 17.5%.

-Tomi Kilgore

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08-28-24 1104ET

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