Kohl’s (KSS) to report Q2 results this week. Here is what to expect

A few months ago, Kohl’s Corporation (NYSE: KSS) brought cheer to its shareholders by delivering a surprise profit for the first quarter and confirming full-year guidance, but it seems the troubles of the department store chain are far from over. In recent months, Kohl’s sales remained under pressure as people continued to cut back on discretionary spending, conacred of the high inflation and financial uncertainties.

For the company’s stock, it has been a roller-coaster ride for quite some time — after gaining momentum each time, the stock struggled to maintain it. Though it made a quick recovery after falling to a multi-year low in the early days of the pandemic, KSS reversed those gains in the following months. Market watchers are cautious in their recommendations for the stock which is unlikely to emerge from the current lows in the near term.

Strategy

Meanwhile, Kohl’s leadership is working on initiatives to revive the business by tackling the fundamental problems it faces, with primary focus on attracting customers to the stores. The company is also opening more Sephora shops, the French personal care & beauty brand, in its locations, and expanding merchandise categories like home décor and pet.

Kohl’s CEO Tom Kingsbury said at the last earnings call, “We are refining our strategy, continuing to enhance our merchandising processes and elevate our focus on the customer. While it will take time for the full impact of our efforts to be realized, I’m happy with how the entire Kohl’s team is driving against these priorities with a clear focus and strong determination. Our objective is to show incremental improvement as we move through 2023 and we set ourselves up to accomplish this with our first quarter performance.”

Q2 Data on Tap

The retailer’s second-quarter report is slated for release on August 23, before regular trading starts. On average, analysts following the company project a July-quarter profit of $0.22 per share, which is down 80% from last year. They are also looking for a 5% decline in revenues to $3.69 billion.

Kohl’s had a mixed start to the year, reporting a decline in net sales for the first quarter, thereby continuing the downtrend experienced throughout 2022. Revenues declined 3% from last year to $3.4 billion as comparable store sales dropped 4.3% year-over-year. But earnings increased in double-digits to $0.13 per share, defying expectations for a net loss. It marked an improvement from the previous quarter when the company slipped to a net loss, while analysts expected it to report earnings.

Outlook

Expecting the recent slump to extend into the back half of the year, a few months ago the company predicted that net sales would decline between 2% and 4% in fiscal 2023. The management said it is looking for full-year adjusted profit of $2.10 per share to $2.70 per share, but cautioned that the macroeconomic uncertainties would continue to weigh on the business.

Kohl’s shares have gained around 10% in the past month and traded below $30 all along. The stock traded higher in the early hours of Friday.