One company in the brick-and-mortar retail market has proven to be a bulwark of resiliency, holding up even as customers only tentatively start venturing out into stores once more to shop. That company is Kohl's (NYSE:KSS), who recently posted earnings that weren't bad news in and of themselves, but certainly didn't qualify as terrific news, either. Despite a serious earnings beat, the company lost a little ground in pre-market trading, and our earlier assessment of the company as a “sleeper buy” still looks valid.
Wins and Losses
The biggest win for Kohl's came with its earnings report. Excluding a certain set of items, the company brought in a profit of $0.01 per share. That's about as close to a loss as you can get without actually being a loss, so how can that be a win? On a relative basis; the company was expected by analyst consensus to post a loss of $0.43 per share, which means it beat estimates by $0.44 per share.
Additionally, in a bit of news that will surely make investors cheer, the company plans to bring back its quarterly dividend at some point in the first half of 2021. The company had suspended the dividend earlier in response to the various lockdowns and closures resulting from COVID-19. With the picture improving, and even states that are restarting lockdowns leaving retail off ground zero this time around, the company can see a path to victory and is poised to bring back the dividend.
As good of news as that is, bad news remained. Same-store sales for Kohl's locations, for example, were down 13.3% in the third quarter. That compares poorly against analyst consensus, which expected the company to lose 11.39% of same-store sales. Kohl's also reported a net loss for the quarter of $12 million, about $0.08 per share, which includes some of those items that were excluded from the final tally. That's still good news, as even the raw loss of $0.08 would still have been a win against the expected loss of $0.43, but it pales against the same time last year, in which the company brought in a profit of $123 million, about $0.78 per share, in the preceding year.
Buying Fewer Clothes, and Buying Them Online
So with those numbers in place, and same-store sales clearly in a slump, how did Kohl's manage to post a profit at all? Kohl's noted that its online sales were doing quite nicely, and the company's CEO, Michelle Gass, noted that that impressive gain in online selling—sufficient enough to turn a profit in the face of double-digit same-store sales declines—would serve the company well as it goes into the holiday shopping season. A string of Black Friday deals should help drive this point home.
An impressive slate, certainly, but there's little denying that sales are on the decline as people simply buy less clothing in general. However, some breeds of clothing did sell more: sleepwear, loungewear and “athleisure” sales were up substantially. Kohl's has been investing heavily in those concepts as people increasingly work from home, and do pretty much everything else there too, so Kohl's plan for 2021 is to cut back on “dressy” clothes and instead stock up on comfortable clothes. It's even launching its own private “athleisure” brand called FLX.
In About as Good a Position as It Can Be
Our latest research, meanwhile, finds that the analyst community is pretty much reserving judgment. Kohl's is still considered a “hold”, with four “sell” ratings, nine “hold” ratings, and three “buy” ratings, which is the same mix that has been in the company for the last three months. The price target has recovered slightly from last month, going from $30.27 on average to $30.53. With the last move being a hiked price target from Telsey Advisory Group back in late October, the analysts are clearly in a holding pattern and acting like it.
Give Kohl's credit; it's done a lot in comparatively little time to address the issues it faces. It's shifted heavily to online selling, it's refined its product mix to best address conditions, it's worked frantically to cut costs and give declining sales less of a drag on the company's bottom line. All of these were points that probably should have been in place with the obvious rise in online selling that we'd seen in general, but moves were made in that direction all along. The pandemic just sped up the pace.
Kohl's isn't exactly in a great position right now, but as brick-and-mortar retailers go, it's in one of the best positions a brick-and-mortar retailer can be in. It's going to have a long, hard slog to get back to even just last year's levels of profitability, made even more hazardous by growing online competition and resurgent restrictions connected to coronavirus in some states. Kohl's is making the right moves, however, and this may be enough to at least keep the company in the competitive fray
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An insider trade occurs when a corporate executive (such as a CEO, CFO or COO) that has non-public information about a company buys or sells shares of that company's stock. Company insiders are required by law to regularly report their stock purchases and sales to the SEC.
Tracking a company's insider trades is a metric that can be used to identify the direction that the company's executives believes that the company is headed. If a number of insiders purchase more shares of their company, they may believe that the company will have strong future earnings and that the share price will increase in the near future.
For example, if Microsoft's CEO, CFO and COO all recently purchased additional shares of Microsoft stock, that would be an indication that there could be unreported news that may positively effect Microsoft's stock price in the near future.
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