Kohl's comparable sales continue decline in third quarter

(Sharecast News) - Kohl's reported a 5.2% decrease in net sales in its third quarter on Tuesday, amounting to $3.8bn, with the retailer's comparable sales decline continuing, down 5.5%. Despite challenges, the department store chain - America's largest by store count - saw a positive development in its gross margin, which increased 158 basis points to 38.9%.

Selling, general and administrative expenses increased 1.9% to $1.4bn, and as a percentage of total revenue, those expenses were 33.5%, rising by 235 basis points year-on-year.

Operating income for the quarter was $157m, down from $200m in the prior year period, with a decrease of 82 basis points year-on-year as a percentage of total revenue.

Net income for the third quarter totalled $59m, resulting in earnings per share of 53 cents, compared to $97m and 82 cents per diluted share in the prior year.

Inventory decreased by 13% year-on-year to $4.2bn, and operating cash flow reached $151m.

For the first nine months of 2023, net sales were down 4.5% at $10.9bn, with comparable sales down 5.0%.

The gross margin for the nine months improved slightly to 39% while selling, general and administrative expenses decreased 0.2% to $3.9bn.

Operating income for the first three quarters totalled $418m, compared to $548m in the previous year, with a decrease of 91 basis points year-over-year as a percentage of total revenue.

Net income for the period was $131m, resulting in earnings per share of $1.18, compared to $254m and $2.02 per diluted share in the first nine months of 2022.

Operating cash flow reached $379m.

Looking ahead, Kohl's revised its full-year outlook and now expected a net sales decrease of between 2.8% and 4%, including the impact of the 53rd week.

The company said it anticipated an operating margin of around 4% and diluted earnings per share in the range of $2.30 to $2.70, excluding non-recurring charges.

Capital was projected towards the lower end of $600m to $650m, while the board declared a quarterly cash dividend of 50 cents per share, payable on 20 December.

"Kohl's third quarter earnings reflect strong gross margin and expense management as well as additional progress against our strategic priorities," said chief executive officer Tom Kingsbury.

"I am pleased with our store performance driven by strong growth in Sephora and the newness in our home and gifting initiatives.

"This reinforces our actions are working and resonating with our customers."

In addition, Kingsbury said Kohl's drove a 13% reduction in inventory as it benefitted from its "new disciplines".

"Our strategies to reposition Kohl's for improved sales and earnings performance remain in the early stages.

"The work we have done in 2023 will continue to build momentum and set us up to be successful in 2024."

At 0859 EST, Kohl's Corporation shares were down 5.07% in premarket trading at $23.60.

Reporting by Josh White for Sharecast.com.