Kohl’s Fourth-Quarter Performance Exceeds Expectations

The retailer's CEO cited strong expense and inventory management and further optimization in promotional strategies.

By David Moin on February 4, 2021 wwd Kohl's Michael Buckner for SheMedia Kohl’s Corp., boosted by robust digital sales, reported its fourth-quarter performance “beat all key metrics” and that the company showed improvement from the third quarter of 2020. Reporting preliminary results, the Menomonee Falls, Wisc.-based department store chain said fourth-quarter diluted earnings per share are expected to be in the range of $1 to $1.05, before considering any impact from tax planning strategies. That’s a decline from the $1.72 in diluted earnings per share reported by the company for year-ago fourth quarter. Comparable sales in the quarter ended Jan. 30, decreased 11 percent, marking the third consecutive quarter of sequential improvement. Total sales were down 10 percent. “We are very pleased with the continued progress we are making against the strategic framework we outlined in October 2020. Our fourth-quarter performance exceeded our expectations across all key metrics with sales strengthening as we moved through the period,” said chief executive officer Michelle Gass. The retailer’s strategic framework emphasizes active and casual sportswear with brands such as Nike, Adidas and Under Armour, as well as beauty, plus stepped up efforts to drive digital sales and innovation. “Digital sales growth remained strong, up more than 20 percent, and accounted for more than 40 percent of net sales, with our stores playing a critical role in supporting the heightened demand,” Gass added. “Our focus on gross margin showed further traction and we managed expenses tightly, which together strengthened our financial position. I want to thank all of our associates for their exceptional service during the highly unique holiday period.” The company said the profit result reflects a better-than-expected gross margin rate, and that it benefited from “strong” SG&A expense management, disciplined inventory management and further optimization in promotional strategies. SG&A expense decline was driven primarily by reductions in store, marketing and technology expenses. “As we carry this momentum into 2021, we are confident that our key strategic initiatives will accelerate our topline growth and expand our operating margin,” Gass said. “Our partnership with Sephora will launch this fall in 200 stores and online, commencing a multiyear buildout that will drive significant growth for Kohl’s,” Gass said. Kohl’s will provide further details on Sephora and other initiatives during its fourth-quarter earnings call, which is scheduled for March 2. The company’s goal is to achieve 7 to 8 percent operating margin.

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