Kohl's shares slide on rising expense concerns

Kohl’s Corp shares fell more than 6 percent on Thursday after the retailer forecast first-quarter earnings below Wall Street’s expectations, partly due to higher costs, taking the shine off strong sales for the holiday shopping period.

Earnings per share will be between 45 cents and 50 cents per share for the first quarter, Chief Financial Officer Bruce Besanko said on a call to discuss the company’s latest quarterly results, affected by higher spending on migration of its data to the cloud and investments in stores and getting items to online buyers.

Analysts on average had expected earnings per share of 55 cents, according to Thomson Reuters I/B/E/S.
The company said sales, general and administrative expenses would rise in the mid-single digits for the quarter. Analysts had estimated a rise of 2.65 percent.

Kohl’s is working to lure back department store customers that have defected to online, fast-fashion and off-price sellers and pull out of an industry-wide slump.

While it has joined rivals in closing some locations and shrunk the size of many more, it has also been spending on technology and in-store investments to blend its online and brick-and-mortar businesses.

For the fourth quarter ended Jan. 27, its same-store sales jumped 6.3 percent, slightly topping analyst expectations.

But it forecast comparable sales growth in 2018 of flat to up 2 percent, indicating its growth rate may slow after 1.5 percent growth in 2017.

Kohl’s had outpaced rivals in a generally strong U.S. holiday shopping season, crediting Nike and Under Armour sales, digital growth and a focus on rolling out exclusive items more quickly.

Revenue rose 9 percent to $6.78 billion in the quarter, slightly beating analyst estimates.

The retailer also said on Thursday supermarket chain Aldi will lease space from some of its locations in a pilot aimed at increasing store traffic.

The test will take place in 10 to 15 stores, Kohl’s Chief Executive Kevin Mansell said on the conference call. The retailer previously said it was looking at partnerships for unused space in its“right-sized” stores.

Kohl’s has also partnered with Amazon.com Inc to sell electronics and accept the online seller’s returns in certain stores. Executives said on the call did not discuss any potential expansion of the program.

Kohl’s expects fiscal 2018 earnings per share of $4.95 to $5.45. Analysts estimate full-year earnings of about $4.72 a share.

The company said gross margin should increase 5 to 10 basis for the year compared to 2017, but that it will be at the low end of that range in the first quarter.

Earnings per share in the fourth quarter rose to $1.99, excluding the impact of a U.S. tax overhaul and store closures. Excluding a state tax settlement EPS was $1.87.

On that basis, analysts had forecast earnings of $1.77 per share.