Same-store sales up again at Kohl’s; stock falls

Kohl’s Corp. on Tuesday reported another set of positive financial results, posting its fifth consecutive quarter of rising sales at established stores.

But while the company outperformed analysts’ expectations on earnings and revenue,investors punished its stock Tuesday, pushing the price down more than 9%. That exceeded the sharp downturn for stocks generally and almost matched the 10.5% decline of Target Corp., which also reported earnings but, unlike Kohl’s, fell short of expectations.

Kohl’s shares remain well above the level of a year ago, but have given up all of their gains since late May.

Mark Altschwager, analyst with Milwaukee-based Robert W. Baird & Co., said by email that retail stocks had held up well in recent months amid market volatility, leaving investors a bit on edge.

“I think what you’re seeing today (and over the past week) is not so much a reaction to something wrong with the Kohl’s numbers, which were quite healthy, but rather investors shedding risk on the fears that this is about as good as it gets,’” Altschwager said.

One silver lining: “The market’s correction lowers the bar ahead of what sets up to be a pretty strong holiday season for the retail sector,” he said.

For the three months ended Nov. 3, Menomonee Falls-based Kohl’s earned $161 million, or 98 cents a share. Last year, Kohl’s earned $117 million, or 70 cents a share, in the comparable period. Most of the gain came from a greatly reduced tax bill, an effect of the federal tax reform approved late last year.

Revenue rose 1.3%, to $4.63 billion, and sales at stores open at least a year were up 2.5%. That extended a rebound that began in the middle of 2017, when Kohl’s ended a year and a half of declining same-store sales.

Results in the third quarter were strong across the entire clothing business, CEO Michelle Gass said in a statement. Clothing is the largest single segment for Kohl’s.

Speaking to analysts on a conference call, chief financial officer Bruce Besanko said an increasing share of Kohl’s 1,159 department stores are benefiting from competitors closing. The closing earlier this year of the roughly 260 stores in the Bon-Ton chain, which included Boston Store and Younkers, is expected to provide an especially strong boost, Besanko said.

The Bon-Ton customers and its geographic array of stores “are in the sweet spot for Kohl’s” Gass told analysts.

With the prospect of capturing former Bon-Ton business, increased spending on marketing and the momentum Kohl’s has generated with rising same-store sales, Gass said the company is “extremely confident as we move into the holiday season.”

Gass also signaled that Kohl’s is expanding its closely watched, year-old partnership with online retailing giant and rival Amazon. Kohl’s already accepts Amazon returns at 100 stores and has Amazon shops in 30. Now, all Kohl’s stores will sell Amazon products such as the Echo smart speakers over the holiday season, Gass said.

Meanwhile, Kohl’s said Tuesday that it is raising its guidance for the year. The firm now expects to earn $5.16 to $5.36 per share for 2018. Previously, Kohl’s had said it expected to earn $4.96 to $5.36.