In premarket trading on Thursday, the shares of Kohl’s Corporation (KSS) surged by 3.2-percent after its earnings for the fourth quarter exceeded expectations and increased its dividend. The net income stood at or $1.44 a share or $252.0 million – down from last year’s $1.58 a share or $296.0 million.
The retailer reported a quarterly profit, which was better than what was expected, thanks to the higher margins in spite of a drop of 2.8% in sales.
The U.S. based department store chain operates an e-commerce website and specialty departmental stores in the United States. This store chain appeals to consumers belonging to the middle class since it sells discounted private label and branded clothing as well as home goods.
The retailer has been struggling a lot since 2 years due to a challenging sales or retail environment in the US. The other factors that have been affecting the profits are a greatly competitive promotional setting and a general recession in consumer spending. Though the continuous efforts of Kohl’s to enhance its efforts along with its strategic ‘the Greatness Agenda’ initiative is anticipated to enhance the company’s sales over the long term, this initiative is making weaker returns in the short term, which is a cause of concern.
Kohl’s sales last year were $6.4 billion. For this year, it has gone down to $6.2 billion. The fall in sales was due to the drop in traffic to the brick-and-mortar stores. It was offset by the strong demand for online stores, according to Kevin Mansell, Chief Executive of the company. Same-store sales fell by 2.2-percent. The quarterly dividend of Kohl’s (55 cents a share) is 10-percent higher year-on-year, which is payable to the shareholders before March 22, 2017.
Mansell said – “We saw improvement in merchandise margin, and our team continued to manage inventory and expenses extremely well.”
The investors should also take a note of the revisions to the latest earnings estimate for KSS because the consensus estimate has been shifting downwards over the last one week. Kohl’s earnings season history shows a mixed response. It has shown positive results in three out of the previous four quarters and negative results in the remaining one quarter.
Kohl’s has been facing tough competition from Amazon, the leading online retailer. On the other hand, it’s also facing weak demand for accessories and clothes. Similar to Macy’s, Kohl’s also reported poor sales in the months of November and December.
According to the estimations of analysts, they expect the firm to post earnings of $3.72 a share for this year on $18.69 billion revenues. Their estimate generally excludes special goods.