To The Moon

$Kohl's(KSS)$ is expected to release irs quarterly earnings for Q4 2024 on 11 March 2025 before the market open.

The quarterly earnings per share consensus estimate have been expected at 73 cents which is a decrease of 56.3% from the same period last year. This mark the consensus estimate for fiscal 2024 earnings to be at $1.30 per share, reflecting a decline of 54.4% from the previous year.

Kohl's (KSS) Last Neutral Earnings Call Saw A Significant Decline Of 31.17%

We saw a neutral earnings call from KSS on 26 Nov 2024 but the share price have seen a significant decline of 31.17% of its share price.

The earnings call highlighted strong performance in gross margin management and growth in specific areas like Sephora and pet business. However, it also revealed significant challenges, including declines in net and comparable sales, weather impacts, and increased expenses. Efforts to reposition the company and improve digital strategy are ongoing, but the mixed results indicate balanced achievements alongside setbacks.

Kohl's (KSS) Guidance On Inventory and Cost Management

During the Kohl's Q3 2023 earnings call, several key metrics and guidance updates were shared by the executives. Net sales decreased by 5.2%, with comparable sales down 5.5% and digital sales declining 16.5%, primarily due to the elimination of online-only promotions. Despite these setbacks, Kohl's reported a positive gross margin of 38.9%, a 158 basis points increase from the previous year, attributed to lower freight costs and disciplined inventory management, which saw a reduction by 13% at the end of the quarter. The company's store comparable sales were down approximately 1%, yet Sephora at Kohl's contributed positively with beauty sales increasing by more than 70%. For fiscal year 2023, Kohl's adjusted its net sales guidance to a decrease between 2.8% and 4% compared to 2022, while maintaining an operating margin forecast of approximately 4%. Earnings per diluted share are now expected to be between $2.30 and $2.70.

The focus remains on strategic priorities such as enhancing customer experience, simplifying value strategies, and strengthening the balance sheet, with an aim to reduce inventory further and manage expenses efficiently.

Key Considerations for Kohl’s Q4 2024 Outlook:

Historical Context

Holiday Performance: Kohl's achieved a gross margin of 38.9% in Q3, an increase of 158 basis points compared to last year, driven by lower freight costs and reduced digital-related costs. Year-to-date gross margin was 39%, up 56 basis points from last year.

Net sales decreased by 5.2%, and comparable sales were down 5.5% in Q3. Digital sales were down 16.5% due to the transition to omnichannel pricing.

Partnerships: The Sephora store-in-store initiative has driven foot traffic in recent quarters; its expansion could bolster Q4 2024 sales. Comparable beauty sales in Sephora shops opened in 2021 and 2022 increased more than 30% in Q3, with total beauty sales increasing more than 70%, driving additional beauty share gains.

Macroeconomic Factors

Consumer Spending: Inflation, interest rates, and employment trends will heavily influence discretionary retail spending. A recessionary environment could pressure margins.

Warmer weather during late September and October affected demand for fall seasonal goods, particularly in apparel, with regional sales declines in the Midwest, Mid-Atlantic, and Northeast.

Weakness was noted in cold weather apparel businesses during Q3, with further work needed to improve overall apparel and footwear performance.

Inventory Management: Improved inventory control (e.g., reduced markdowns) could protect profitability. Inventory was reduced by 13% compared to last year, exceeding the goal of a mid-single-digit decline, positioning the company well for the holiday season.

Company-Specific Initiatives:

Omnichannel Strategy: E-commerce growth and curbside pickup enhancements may offset declining in-store traffic.

Kohl's pet business sales increased more than 40% in Q3, supported by an expanded in-store space and a broader assortment of products.

Cost-Cutting: Kohl’s has emphasized cost reductions (e.g., $100M savings in 2023), which might improve earnings if sustained.

Interest expense increased by $8 million to $89 million in Q3 due to increased revolver borrowings.

Kohl's (KSS) Price Target

Based on 7 Wall Street analysts offering 12 month price targets for Kohl's in the last 3 months. The average price target is $11.18 with a high forecast of $13.00 and a low forecast of $10.00. The average price target represents a -8.44% change from the last price of $12.21.

KSS has been losing quite significantly after its last earnings call, so the market might be looking at how KSS manage its inventory and also its cost control.

Technical Analysis - Exponential Moving Average (EMA)

KSS is trying to come back from the defended level of 26-EMA, now KSS has managed to moved above the 26-EMA, but the RSI still indicate that the momentum is still weak.

Though we are seeing a gap up last Friday (07 Mar) but the strength is rather weak, we need to see a clearer conviction from investors in terms of stronger momentum coming from RSI.

This is also because of the tariffs impact on KSS that might have investors raising their concerns.

Summary

Kohl’s performance will hinge on holiday demand execution, macroeconomic conditions, and the success of strategic initiatives. I would think the important things investors should look out is the inventory reduction and also their expense management.

These two factors are crucial in either the earnings call or guidance that could move the share price in either directions.

Appreciate if you could share your thoughts in the comment section whether you think KSS could provide a better inventory reduction and also there is significant improvement in the expense management.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.