Kohl's Reports Fourth Quarter and Full Year Fiscal 2023 Financial Results
- Improvements in operating income, gross margin, and net income despite sales declines.
- Strategic initiatives and partnerships with Sephora and Babies 'R' Us to drive future growth.
- Introduction of fiscal year 2024 financial outlook focusing on comparable sales growth and capital allocation.
- Quarterly cash dividend declared for shareholders.
- Decrease in net sales and comparable sales for the fourth quarter and fiscal year 2023.
- Challenges in sales performance and inventory management.
- Potential impact from credit card late fee regulatory changes in the second half of 2024.
Insights
Examining Kohl's Corporation's recent financial performance reveals several key points of interest for investors. The reported decrease in net sales by 1.1% for the fourth quarter and 3.4% for the fiscal year, alongside a 4.3% and 4.7% drop in comparable sales respectively, indicates a contraction in consumer spending at Kohl's stores. However, a notable improvement in gross margin, up by 937 basis points in Q4 and 347 basis points for the fiscal year, suggests effective cost management strategies are in place, potentially offsetting some revenue declines.
The reduction in Selling, General & Administrative (SG&A) expenses by 4.0% year-over-year and the consequent improvement in operating income from a $302 million loss to a $299 million gain year-over-year are particularly encouraging. These figures reflect a successful implementation of efficiency measures. Yet, the guidance for net sales in 2024, projecting a possible decrease or slight increase, coupled with an operating margin forecast between 3.6% and 4.1%, signals cautious optimism but also underscores the challenges ahead in a potentially volatile retail environment.
Investors should also note the commitment to a dividend, indicating confidence in cash flow sufficiency to return capital to shareholders. The 10% year-over-year inventory reduction aligns with this strategy, as it suggests a focus on liquidity and balance sheet strength.
From a market perspective, Kohl's strategic initiatives, including the expansion of its partnership with Sephora and the introduction of Babies "R" Us to target the baby gear category, are moves to capture new market segments and diversify its revenue streams. The reported best comparable sales performance in stores since 2010, driven by the Sephora partnership, signifies the potential of strategic brand collaborations to drive foot traffic and sales.
The mention of 'white space opportunities' suggests Kohl's is identifying and targeting underserved markets, which could be a growth driver if executed well. However, the broader retail landscape is facing headwinds from e-commerce competition and changing consumer behaviors, which may continue to pressure traditional brick-and-mortar operations. The success of these initiatives should be closely monitored as they could play a crucial role in Kohl's ability to rebound from the reported sales declines.
Within the retail sector, Kohl's reported performance must be contextualized against broader industry trends, such as the shift towards online shopping and the increased importance of omni-channel retail strategies. The company's focus on enhancing store experience and inventory management processes reflects an understanding of the need for a seamless integration between physical and online retail spaces. The increase in gross margin suggests that Kohl's may be succeeding in improving its merchandise mix and promotional strategies, which is critical in an industry characterized by high competition and promotional activity.
The strategic partnership with Sephora and the new venture with Babies "R" Us indicate a recognition of the value in niche markets and exclusive offerings. These steps could help differentiate Kohl's in a crowded marketplace. However, the long-term success of these initiatives will depend on the company's ability to maintain relevance and adapt to fast-evolving consumer preferences.
-
Fourth quarter net sales decreased
1.1% and comparable sales decreased4.3% ; fiscal year 2023 net sales decreased3.4% and comparable sales decreased4.7% -
Fourth quarter diluted earnings per share (“EPS”) of
$1.67 $2.85 -
Operating cash flow of
$789 million $1.2 billion - Committed to further strengthening balance sheet and returning capital to shareholders through the dividend
- Introduces fiscal year 2024 financial outlook
Tom Kingsbury, Kohl’s chief executive officer, said “2023 represented an important year for Kohl’s. We enhanced our store experience, expanded our partnership with Sephora, and invested in underpenetrated categories. We also simplified our value strategies and implemented new inventory management processes. The early success of our strategies is evident. Our store business had its best comparable sales performance since 2010, Sephora at Kohl’s continued to drive meaningful beauty sales growth, and we managed inventory down
“Looking ahead, we are incredibly focused on delivering comparable sales growth in 2024. Our strategic initiatives are positioned to build momentum and contribute more meaningfully, and we will partner with Babies “R” Us to meaningfully expand our presence in the baby gear category which represents a compelling white space opportunity for Kohl’s. Through our collective efforts Kohl’s is becoming more relevant to customers, which strengthens our conviction in our longer-term opportunity,” Kingsbury continued.
Fourth Quarter 2023 Results
Comparisons refer to the 14-week period ended February 3, 2024 versus the 13-week period ended January 28, 2023 unless noted otherwise
-
Net sales decreased
1.1% year-over-year, to$5.7 billion $164 million -
Comparable sales, which compare the 13-week period ending January 27, 2024 versus the 13-week period ended January 28, 2023, decreased
4.3% . -
Gross margin as a percentage of net sales was
32.4% , an increase of 937 basis points. -
Selling, general & administrative (SG&A) expenses decreased
4.0% year-over-year, to$1.6 billion 27.0% , a decrease of 82 basis points year-over-year. -
Operating income was
$299 million $302 million 5.0% , an increase of 1,005 basis points year-over-year. -
Net income was
$186 million $1.67 $273 million $2.49 -
Inventory was
$2.9 billion 10% year-over-year. -
Operating cash flow was
$789 million
Fiscal Year 2023 Results
Comparisons refer to the 53-week period ended February 3, 2024 versus the 52-week period ended January 28, 2023 unless noted otherwise
-
Net sales decreased
3.4% year-over-year, to$16.6 billion $164 million -
Comparable sales, which compare the 52-week period ending January 27, 2024 versus the 52-week period ended January 28, 2023, decreased
4.7% . -
Gross margin as a percentage of net sales was
36.7% , an increase of 347 basis points. -
Selling, general & administrative (SG&A) expenses decreased
1.3% year-over-year, to$5.5 billion 31.5% , an increase of 67 basis points year-over-year. -
Operating income was
$717 million $246 million 4.1% , an increase of 274 basis points year-over-year. -
Net income was
$317 million $2.85 $19 million $0.15 -
Operating cash flow was
$1.2 billion
2024 Financial and Capital Allocation Outlook
For the full year 2024, which has 52 weeks compared to 53 weeks in full year 2023, the Company’s guidance includes the potential impact from credit card late fee regulatory changes in the second half of 2024. The Company currently expects the following:
-
Net sales: A decrease of (
1% ) to an increase of1% -
Comparable sales: In the range of
0% to2% -
Operating margin: In the range of
3.6% to4.1% -
Diluted EPS: In the range of
$2.10 $2.70 -
Capital Expenditures: Approximately
$500 million -
Dividend: On February 28, 2024, Kohl’s Board of Directors declared a quarterly cash dividend on the Company’s common stock of
$0.50
Fourth Quarter 2023 Earnings Conference Call
Kohl’s will host its quarterly earnings conference call at 9:00 am ET on March 12, 2024. A webcast of the conference call and the related presentation materials will be available via the Company's web site at investors.kohls.com, both live and after the call.
Cautionary Statement Regarding Forward-Looking Information
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Company intends forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “anticipates,” “plans,” or similar expressions to identify forward-looking statements. Forward-looking statements include the information under “2024 Financial and Capital Allocation Outlook.” Such statements are subject to certain risks and uncertainties, which could cause the Company's actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, risks described more fully in Item 1A in the Company’s Annual Report on Form 10-K, which are expressly incorporated herein by reference, and other factors as may periodically be described in the Company’s filings with the SEC. Forward-looking statements relate to the date initially made, and the Company undertakes no obligation to update them.
About Kohl's
Kohl’s (NYSE: KSS) is a leading omnichannel retailer built on a foundation that combines great brands, incredible value and convenience for our customers. Kohl's serves millions of families in our more than 1,100 stores in 49 states, online at Kohls.com, and through our Kohl's App. For a list of store locations or to shop online, visit Kohls.com. For more information about Kohl’s impact in the community or how to join our winning team, visit Corporate.Kohls.com.
KOHL’S CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) |
||||||||||||
|
Three Months Ended |
Twelve Months Ended |
||||||||||
(Dollars in Millions, Except per Share Data) |
February 3, 2024 |
January 28, 2023 |
February 3, 2024 |
January 28, 2023 |
||||||||
Net sales |
$ |
5,710 |
|
$ |
5,775 |
|
$ |
16,586 |
|
$ |
17,161 |
|
Other revenue |
|
246 |
|
|
244 |
|
|
890 |
|
|
937 |
|
Total revenue |
|
5,956 |
|
|
6,019 |
|
|
17,476 |
|
|
18,098 |
|
Cost of merchandise sold |
|
3,860 |
|
|
4,444 |
|
|
10,498 |
|
|
11,457 |
|
Gross margin rate |
|
32.4 |
% |
|
23.0 |
% |
|
36.7 |
% |
|
33.2 |
% |
Operating expenses: |
|
|
|
|
||||||||
Selling, general, and administrative |
|
1,610 |
|
|
1,677 |
|
|
5,512 |
|
|
5,587 |
|
As a percent of total revenue |
|
27.0 |
% |
|
27.9 |
% |
|
31.5 |
% |
|
30.9 |
% |
Depreciation and amortization |
|
187 |
|
|
200 |
|
|
749 |
|
|
808 |
|
Operating income (loss) |
|
299 |
|
|
(302 |
) |
|
717 |
|
|
246 |
|
Interest expense, net |
|
82 |
|
|
78 |
|
|
344 |
|
|
304 |
|
Income (Loss) before income taxes |
|
217 |
|
|
(380 |
) |
|
373 |
|
|
(58 |
) |
Provision (Benefit) for income taxes |
|
31 |
|
|
(107 |
) |
|
56 |
|
|
(39 |
) |
Net income (loss) |
$ |
186 |
|
$ |
(273 |
) |
$ |
317 |
|
$ |
(19 |
) |
Average number of shares: |
|
|
|
|
||||||||
Basic |
|
110 |
|
|
110 |
|
|
110 |
|
|
120 |
|
Diluted |
|
111 |
|
|
110 |
|
|
111 |
|
|
120 |
|
Earnings (Loss) per share: |
|
|
|
|
||||||||
Basic |
$ |
1.69 |
|
$ |
(2.49 |
) |
$ |
2.88 |
|
$ |
(0.15 |
) |
Diluted |
$ |
1.67 |
|
$ |
(2.49 |
) |
$ |
2.85 |
|
$ |
(0.15 |
) |
KOHL’S CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) |
||||
(Dollars in Millions) |
February 3, 2024 |
January 28, 2023 |
||
Assets |
|
|
||
Current assets: |
|
|
||
Cash and cash equivalents |
$ |
183 |
$ |
153 |
Merchandise inventories |
|
2,880 |
|
3,189 |
Other |
|
347 |
|
394 |
Total current assets |
|
3,410 |
|
3,736 |
Property and equipment, net |
|
7,720 |
|
7,926 |
Operating leases |
|
2,499 |
|
2,304 |
Other assets |
|
380 |
|
379 |
Total assets |
$ |
14,009 |
$ |
14,345 |
Liabilities and Shareholders’ Equity |
|
|
||
Current liabilities: |
|
|
||
Accounts payable |
$ |
1,134 |
$ |
1,330 |
Accrued liabilities |
|
1,201 |
|
1,220 |
Borrowings under revolving credit facility |
|
92 |
|
85 |
Current portion of: |
|
|
||
Long-term debt |
|
— |
|
275 |
Finance leases and financing obligations |
|
83 |
|
94 |
Operating leases |
|
102 |
|
111 |
Total current liabilities |
|
2,612 |
|
3,115 |
Long-term debt |
|
1,638 |
|
1,637 |
Finance leases and financing obligations |
|
2,680 |
|
2,786 |
Operating leases |
|
2,781 |
|
2,578 |
Deferred income taxes |
|
107 |
|
129 |
Other long-term liabilities |
|
298 |
|
337 |
Shareholders’ equity: |
|
3,893 |
|
3,763 |
Total liabilities and shareholders’ equity |
$ |
14,009 |
$ |
14,345 |
KOHL’S CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
||||||
|
Twelve Months Ended |
|||||
(Dollars in Millions) |
February 3, 2024 |
January 28, 2023 |
||||
Operating activities |
|
|
||||
Net income (loss) |
$ |
317 |
|
$ |
(19 |
) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
||||
Depreciation and amortization |
|
749 |
|
|
808 |
|
Share-based compensation |
|
42 |
|
|
30 |
|
Deferred income taxes |
|
(8 |
) |
|
(84 |
) |
Non-cash lease expense |
|
92 |
|
|
106 |
|
Other non-cash items |
|
6 |
|
|
30 |
|
Changes in operating assets and liabilities: |
|
|
||||
Merchandise inventories |
|
315 |
|
|
(116 |
) |
Other current and long-term assets |
|
11 |
|
|
87 |
|
Accounts payable |
|
(196 |
) |
|
(353 |
) |
Accrued and other long-term liabilities |
|
(67 |
) |
|
(99 |
) |
Operating lease liabilities |
|
(93 |
) |
|
(108 |
) |
Net cash provided by operating activities |
|
1,168 |
|
|
282 |
|
Investing activities |
|
|
||||
Acquisition of property and equipment |
|
(577 |
) |
|
(826 |
) |
Proceeds from sale of real estate |
|
26 |
|
|
43 |
|
Other |
|
(11 |
) |
|
— |
|
Net cash used in investing activities |
|
(562 |
) |
|
(783 |
) |
Financing activities |
|
|
||||
Net borrowings under revolving credit facility |
|
7 |
|
|
85 |
|
Deferred financing costs |
|
— |
|
|
(6 |
) |
Treasury stock purchases |
|
— |
|
|
(658 |
) |
Shares withheld for taxes on vested restricted shares |
|
(16 |
) |
|
(21 |
) |
Dividends paid |
|
(220 |
) |
|
(239 |
) |
Repayment of long-term borrowings |
|
(275 |
) |
|
— |
|
Finance lease and financing obligation payments |
|
(93 |
) |
|
(106 |
) |
Proceeds from financing obligations |
|
21 |
|
|
11 |
|
Proceeds from stock option exercises |
|
— |
|
|
1 |
|
Net cash used in financing activities |
|
(576 |
) |
|
(933 |
) |
Net increase (decrease) in cash and cash equivalents |
|
30 |
|
|
(1,434 |
) |
Cash and cash equivalents at beginning of period |
|
153 |
|
|
1,587 |
|
Cash and cash equivalents at end of period |
$ |
183 |
|
$ |
153 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240312215447/en/
Investor Relations:
Mark Rupe, (262) 703-1266, mark.rupe@kohls.com
Media:
Jen Johnson, (262) 703-5241, jen.johnson@kohls.com
Source: Kohl's
FAQ
What were Kohl’s fourth quarter 2023 net sales and comparable sales results?
What was Kohl’s fiscal year 2023 net sales and comparable sales performance?
What was Kohl’s fourth quarter 2023 diluted earnings per share (EPS)?
What is Kohl’s fiscal year 2024 financial outlook?
What dividend did Kohl’s declare for shareholders?
