Retailer Kohl’s Corporation (KSS) posted fourth-quarter fiscal 2013 earnings of $1.56 per share, beating the Zacks Consensus Estimate of $1.54 by 1.3% and management’s expectation of $1.53 per share. Earnings, however, declined 6.0% from the prior-year quarter earnings of $1.66 per share.
Earnings dipped due to lower sales, higher operating expenses during the quarter and an extra operating week in the year-ago period. Higher-than-expected costs due to unanticipated expenses related to its e-commerce business also had an adverse impact on earnings.
Sales and Margins
Net sales dipped 3.8% from the year-ago level to $6.099 billion due to a decline in comparable sales and higher sales in the year-ago quarter owing to an extra week. Sales also missed the Zacks Consensus Estimate of $6.114 billion. Comps declined 2.0% during the quarter, as expected by management, versus comp sales growth of 1.9% in the prior-year quarter and a decline of 1.6% in the prior quarter.
Though comp sales improved 0.8% in November and December, the company witnessed lower-than-expected sales in January due to a decline in traffic and lower merchandise on clearance. A volatile retail sales environment and lower consumer confidence resulted in lower traffic. The company was able to manage its inventory and merchandise content during the quarter.
Gross margin expanded 70 basis points (bps) to 34% due to lower costs of merchandise. Operating margin however declined 80 bps to 10.0% from the year-ago quarter due to higher operating expenses. Both selling, general & administrative and depreciation expenses increased in the quarter.
Fiscal 2013 Results
Kohl’s delivered earnings of $4.05 per share, beating the Zacks Consensus Estimate of $4.04 by 0.2% and management’s expectation of $4.03 per share. Earnings however declined 3.0% from the prior-year earnings of $4.17 per share due to lower sales and decline in comparable store sales in the year-ago period due to an additional week in the last year.
Net sales declined 1.3% from the year-ago level to $19.031 billion due to a decline in comparable sales and higher sales last year due to an extra week. Sales also missed the Zacks Consensus Estimate of $19.041 billion. Comps declined 1.2% during fiscal 2013 versus comp sales growth of 0.3% in fiscal 2012.
Store Update
Kohl’s did not open any new stores in the fourth quarter. The company ended the quarter with 1,158 stores in 49 states. Kohl’s opened 12 new stores and remodeled 30 stores in fiscal 2013.
Other Financial Details
As of Feb 1, 2014, Kohl's cash and cash equivalents were $971 million compared with $598 million in the previous quarter. Long-term debt was flat at $2.792 billion during the period.
During the quarter, Kohl's board increased its quarterly cash dividend by 11% to 39 cents from 35 cents per share. The new dividend will be paid on Mar 26 to shareholders of record as of Mar 12, 2014.
Guidance
Kohl’s has issued its initial guidance for fiscal 2014. The company expects earnings in the range of $4.05 to $4.45 per share, sales growth in the range of 0.5%–2.5% and comparable store sales growth in the range of 0%–2%. The Zacks Consensus Estimate for fiscal 2014 is $4.40 per share, in-line with the company’s expectation.
Kohl’s has a Zacks Rank #3 (Hold). Other better-ranked companies in the retail sector include Christopher & Banks Corp. (CBK), Macy’s Inc (M), and Finish Line Inc. (FINL). While Christopher holds a Zacks Rank #1 (Strong Buy), Macy’s and Finish Line carry a Zacks Rank #2 (Buy).
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