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Kohl’s Jumps 7.8% on Q4 Beat and Positive Outlook

Kohl’s Corporation (KSS) reported better-than-expected fourth-quarter results, with earnings beating and revenue marginally missing expectations. The company also gave a positive outlook for fiscal year 2022, impressing investors who pushed KSS shares up 7.8% on the news.  

Additionally, the company doubled its quarterly common dividend and announced a new share buyback program. Shares of the omnichannel retailer ended the day up 2.1% at $56.80 on March 1.

Better-than-Expected Results

Kohl’s recorded Q4 adjusted earnings of $2.20 per share, which came in 6 cents better than analysts’ estimates of $2.14 per share, but 2 cents lower than the year-ago quarter’s number of $2.22 per share.

However, its quarterly revenue of $6.5 billion came in slightly below expectations of $6.57 billion. The figure grew 5.8% over Q4FY20 revenue of $6.14 billion.

For FY21, Kohl’s adjusted earnings of $7.33 per share came in much better than FY20’s adjusted loss of $1.21 per share. Similarly, full-year revenue of $19.43 billion advanced 21.8% over FY20 revenue of $15.95 billion.

CEO Comments

Delighted with the company’s performance, Kohl’s CEO, Michelle Gass, said, “In 2021, we delivered all-time record earnings per share, significantly ahead of our expectations. Our operating margin of 8.6% exceeded our 2023 goal two years ahead of plan, a direct result of our efforts to restructure the business to be more profitable. We remain extremely confident in the future growth and cash flow generation of our business, and in 2022 will build on our momentum as we further scale key initiatives such as Sephora.”

Upbeat Outlook

Based on current business momentum and implementation of its turnaround strategy, Kohl’s guided for full-year fiscal 2022 net sales to grow by 2% to 3% over FY21.

Further, FY22 adjusted earnings are projected to be between $7.00 per share and $7.50 per share, significantly higher than the consensus estimate of $6.54 per share.

Shareholder Rewards

On February 28, Kohl’s Board of Directors declared a quarterly common dividend of $0.50 per share payable on March 30, to shareholders on record as of March 16.

Moreover, its Board also authorized a $3 billion share buyback program. The company plans to repurchase at least $1.0 billion in shares in 2022, out of which $500 million is expected to be repurchased in Q2, either through open market purchases or accelerated share repurchase programs (ASR).

Analysts’ View

Responding to Kohl’s results, Cowen & Co. analyst Oliver Chen reiterated a Buy rating on the stock with a price target of $75, implying 32% upside potential to current levels.

The analyst is particularly encouraged by Kohl’s continued partnership and further investment with the Sephora brand, which he believes will drive the company’s growth and make it a beauty destination.

Overall, the KSS stock has a Moderate Buy consensus rating based on 6 Buys, 2 Holds, and 2 Sells. The average Kohl’s price target of $64.80 implies 14.1% upside potential to current levels. Its shares have gained 4.6% year-to-date.

Stock Investors

TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on Kohl’s, with 24.5% of portfolios tracked by TipRanks, increasing their exposure to KSS stock over the past 30 days.

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