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Earnings preview: Tough holiday season could be a drag on Kohl’s Q4 results

There has been apprehension about the fourth-quarter performance of Kohl’s (KSS) after the department store chain issued a weak outlook for holiday sales. The market will be closely monitoring the final outcome when the company unveils the results on March 5 before the market opens.

Kohl's third quarter 2018 Earnings Infographic
Kohls Corporation Q3 2018 Earnings-Infographic

Analysts’ consensus earnings estimate for the December quarter is $2.18 per share, which represents a 17% year-over-year increase. There is optimism that the improved online channel and competitive pricing would drive top-line growth. The company’s upwardly revised earnings estimate for the whole of 2018 is $5.50-$5.55 per share, which is 32% higher compared to the prior year and in line with analysts’ forecast.

There is optimism that improved online channel and competitive pricing would drive top-line growth in the fourth quarter

The initial estimates show that holiday comparable sales rose 1.2% in 2018, sharply slower than the 7% growth achieved a year earlier. For the third quarter, Kohl’s reported stronger than expected earnings that climbed to $0.98 per share from $0.70 per share. At $4.63 billion, revenues were up 1.3%.

Of late, the Brookfield, Wisconsin-based retailer has been witnessing positive momentum across its apparel business. The management’s ongoing efforts to enhance the merchandise offerings and ramp up the e-commerce platform are having a positive effect on sales. The company is also making efforts to boost traffic by offering a better omnichannel experience to customers.

Also see: Kohl’s Corp. Q2 2018 Earnings Conference Call Transcript

On the downside, higher costs might hamper margin growth, continuing the trend seen in the recent quarters. Also, the ongoing investments in technologies such as cloud – to bolster long-term growth – could impact profitability.

Among the other retailers, L Brands (LB) this week reported an increase in fourth-quarter earnings and revenues but guided full-year earnings below estimates. Macy’s (M) adjusted earnings dropped 4% to $2.73 per share in the December quarter but topped expectations. J.C. Penney’ shares gained Thursday after its earnings beat the Street view, despite a sharp year-over-year decline.

Kohl’s shares gained steadily this week, recovering from the losses they suffered since the beginning of the year. The stock traded broadly at the levels seen a year earlier.

 

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