On May 30, 2024, Kohl's Corp (KSS, Financial) released its 8-K filing reporting financial results for the first quarter ended May 4, 2024. Kohl's operates about 1,174 department stores in 49 states, selling moderately priced private-label and national brand clothing, shoes, accessories, cosmetics, and home furnishings. The company also has a significant digital sales presence. Women's apparel is Kohl's largest category, generating 26% of its 2023 sales. The retailer, headquartered in Menomonee Falls, Wisconsin, opened its first department store in 1962.
Performance Overview
Kohl's Corp (KSS, Financial) reported a net loss of $27 million for Q1 2024, translating to a loss per share of $0.24. This performance is significantly below the analyst estimate of $0.03 earnings per share. The company's total revenue for the quarter was $3,382 million, also falling short of the estimated $3,334.52 million.
Tom Kingsbury, Kohl's CEO, commented, “Our first quarter results did not meet our expectations and are not reflective of the direction we are heading with our strategic initiatives. Regular price sales increased year-over-year, with early success in underpenetrated categories, positive trends in our Women’s business, and continued strong growth in Sephora. However, lower clearance sales versus last year represented a more than 600 basis point drag on comparable sales. Importantly, we were able to deliver gross margin expansion, manage inventory down 13% and tightly control expenses in the quarter.”
Financial Achievements and Challenges
Despite the disappointing earnings, Kohl's achieved a gross margin rate of 39.5%, up from 39.0% in the same period last year. The company also managed to reduce its inventory by 13%, a significant achievement in the retail sector where inventory management is crucial for maintaining profitability.
However, the company faced challenges with lower clearance sales, which negatively impacted comparable sales by over 600 basis points. Operating expenses remained high, with selling, general, and administrative expenses accounting for 36.3% of total revenue, up from 34.7% in the previous year.
Income Statement Highlights
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Net Sales | $3,178 million | $3,355 million |
| Other Revenue | $204 million | $216 million |
| Total Revenue | $3,382 million | $3,571 million |
| Cost of Merchandise Sold | $1,923 million | $2,047 million |
| Operating Income | $43 million | $98 million |
| Net (Loss) Income | $(27) million | $14 million |
Balance Sheet and Cash Flow
As of May 4, 2024, Kohl's reported total assets of $14,278 million, slightly down from $14,710 million in the previous year. The company's cash and cash equivalents stood at $228 million, compared to $286 million a year earlier. Total liabilities were $10,465 million, with shareholders' equity at $3,813 million.
In terms of cash flow, Kohl's used $7 million in operating activities, a significant improvement from the $202 million used in the same period last year. The company also invested $126 million in property and equipment and generated $178 million from financing activities.
Analysis and Outlook
Kohl's Corp (KSS, Financial) faces a challenging retail environment, with lower clearance sales impacting overall performance. However, the company has shown resilience through gross margin expansion and effective inventory management. The strategic initiatives, including partnerships with Sephora and Babies “R” Us, are expected to contribute positively in the future.
Investors will need to monitor how Kohl's navigates these challenges and leverages its strategic initiatives to drive growth. The company's ability to manage expenses and improve sales in underpenetrated categories will be crucial for its long-term success.
Explore the complete 8-K earnings release (here) from Kohl's Corp for further details.
