‘we’re now set up for profitable growth’

Kohl’s Corp (NYSE: KSS) shares were in the green this morning after the department store company reported better-than-expected earnings for its fiscal fourth quarter. The stock, however, gave up the entire intraday gain later as shareholders focused more on revenue that came in shy of Street estimates.

We’ve navigating the supply chain headwinds the entire year and in Q4, in particular, we did have more unexpected delays during the holiday quarter. But we’ve done a lot of course correcting. In terms of our spring receipts, those are flowing in.

What Kohl’s Q4 report tells us

• Net income printed at $299 million versus the year-ago figure of $342 million.
• Per-share earnings stood at $2.20, unchanged from Q4 of fiscal 2020.
• Revenue jumped 6.0% year-over-year to $6.50 billion, as per the earnings press release.
• FactSet consensus was for $2.10 of EPS on $6.60 billion in revenue.

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Kohl’s has been under activist pressure to sell itself over the past few weeks. The retailer rejected over $60 a share proposals recently. Explaining why on CNBC’s “The Exchange”, CEO Michelle Gass said:

We have conviction in our capital allocation strategy. We’re now set up for profitable growth. We have initiatives that we’ve never had before. Sephora is delivering mid-single-digit growth; that alone will give us a lot of tailwind, on top of our active initiative, the new brands and the like. So, we see a lot of upside value in return to shareholders. The board is measuring other paths up against our plan.

Dividend, buyback, and future guidance

The retailer doubled its annual dividend on Tuesday to $2.00 per share. The board also authorised $1.0 billion worth of share repurchase in 2022. $500 million of these will be bought back in Q2. Last month, activist Macellum Advisors nominated ten members to Kohl’s board. The chief executive noted:

We have an incredible board with diverse experiences. It’s refreshed, three out of six new members in the last three years came through the settlement with the activists last year. So, I think the board is incredibly well-equipped to guide the strategy going forward.

According to Adam Levine-Weinberg of Seeking Alpha, Kohl’s shares could double by 2024. Kohl’s is now forecasting up to a 3.0% annualised growth in sales this year on $7.00 to $7.50 of per-share earnings. In comparison, analysts had called for 1.70% in sales growth and $6.56 of EPS.

The early signs on the women business are also promising. We’re looking forward to a very strong year for the company.