Kohl's (KSS) earnings report review for the 3rd quarter of their 2020 fiscal year
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Category: Stock Market and Kohl's (KSS)
Date: 18 November 2020 Stock Price of Kohl's: $29.18 We take a look at the 3rd quarter 2020 earnings report of Kohl's a retailer with over 1 100 stores in 49 states. Revenue for the quarter came in at $3.979 billion down -14% compared to the same quarter of the previous year and they made a loss of -$12 million.
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I continue to be very proud of how our organization is navigating through the COVID-19 pandemic. Our third quarter results exceeded our expectations with significant sequential sales and profitability improvement. Digital sales growth remained strong and our actions to improve our gross margin showed great progress - Michelle Gass, Kohl’s chief executive officer. "
About Kohl's
Kohl’s (NYSE: KSS) is a leading omnichannel retailer with more than 1,100 stores in 49 states. With a commitment to inspiring and empowering families to lead fulfilled lives, Kohl’s offers amazing national and exclusive brands, incredible savings and an easy shopping experience in our stores, online at Kohls.com and on Kohl's mobile app. Since its founding, Kohl's has given more than $700 million to support communities nationwide, with a focus on family health and wellness.
Kohl's store front. Image obtained from globalcosmeticnews.com
Overview of Kohl's 3rd quarter 2020 earnings report
The data refers to the latest quarter unless specified otherwise
- Total revenues: $3.979 billion (down from $4.625 billion for the same quarter of the previous year)
- Total revenues decreased by -14% over the last 12 months
- Cost of merchandise sold: $2.424 billion (down from $2775 billion for the same quarter of the previous year)
- Cost of merchandise sold decreased by -12.6% over the last 12 months
- So margin squeeze taking place at Kohl's as revenues showed a decline a lot stronger than their cost of merchandise sold
- Net loss: -$12 million (down from $123 million for the same quarter of the previous year)
- Diluted loss per share: -$0.08 (down from 0.78 for the same quarter of the previous year)
- PE ratio of Kohl's: Since the group is currently loss making a PE ratio cannot be calculated
- Diluted shares in issue: 154 million (down from 157 million for the same quarter of the previous year)
- Cash and cash equivalents: $1.939 billion
- Cash and equivalents per share: $12.59
- Cash and equivalents makes up 43% of Kohl's market capital
- Cash and equivalents makes up 12.6% of Kohl's total assets
- Merchandise inventories:: $3.607 billion
- Inventories makes up 23.4% of Kohl's total assets
- Stockholders equity in Kohl's: $4.838 billion
- Stockholders equity per Kohl's stock: $31.41
- So Kohl's is trading at times its 0.93 stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms then to trade at
- Cash generated from operations for the 9 months: $910 million
- Cash generated from operations per share for the 9 months : $5.90
Kohl's management commentary on their 3rd quarter 2020 earnings
MENOMONEE FALLS, Wis.--(BUSINESS WIRE)-- Kohl’s Corporation (NYSE:KSS) today reported results for the quarter ended October 31, 2020.
“I continue to be very proud of how our organization is navigating through the COVID-19 pandemic. Our third quarter results exceeded our expectations with significant sequential sales and profitability improvement. Digital sales growth remained strong and our actions to improve our gross margin showed great progress. We also further strengthened our financial position and fully repaid our revolver during the period, which underscores the solid cash flow generation of our business,” said Michelle Gass, Kohl’s chief executive officer.
“We entered the holiday season well-positioned and prepared to serve our customers with more omnichannel conveniences in place to deliver the great experience they always expect from Kohl’s. As we look ahead, we are incredibly focused on executing against our new strategic framework, which represents our greatest opportunity to drive long-term sales and profit growth and create shareholder value in the coming years,” said Gass. “In addition, through disciplined capital management we plan to reinstate a dividend during the first half of 2021.”
“I continue to be very proud of how our organization is navigating through the COVID-19 pandemic. Our third quarter results exceeded our expectations with significant sequential sales and profitability improvement. Digital sales growth remained strong and our actions to improve our gross margin showed great progress. We also further strengthened our financial position and fully repaid our revolver during the period, which underscores the solid cash flow generation of our business,” said Michelle Gass, Kohl’s chief executive officer.
“We entered the holiday season well-positioned and prepared to serve our customers with more omnichannel conveniences in place to deliver the great experience they always expect from Kohl’s. As we look ahead, we are incredibly focused on executing against our new strategic framework, which represents our greatest opportunity to drive long-term sales and profit growth and create shareholder value in the coming years,” said Gass. “In addition, through disciplined capital management we plan to reinstate a dividend during the first half of 2021.”
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Highlights of the 3rd quarter 2020 for Kohl's (KSS)
- Strengthened financial position during the quarter by fully repaying revolver and ending with $1.9 billion in cash
- Strong operating cash flow year-to-date of $910 million
- Third quarter comparable sales decrease 13.3%
- Third quarter loss per share of ($0.08); adjusted diluted earnings per share(2) of $0.01
Kohl's (KSS) stock price history of the last 5 years
The image below, obtained from Google shows the stock price history of Kohl's (NYSE:KSS) for the last 5 years and it's not been a good time for Kohl's stockholders over the last 5 years. 5 years ago the stock was trading at $47 and its currently trading at $29.18 That's a loss of -37.9% suffered by Kohl's stockholders over the last 5 years.
The stock of Kohl's is trading at a lot closer to its 52 week low than it is to its 52 week high which to us is a clear indication that the short term sentiment and momentum of Kohl's stock is negative at this point in time.
The stock of Kohl's is trading at a lot closer to its 52 week low than it is to its 52 week high which to us is a clear indication that the short term sentiment and momentum of Kohl's stock is negative at this point in time.
Kohl's (NYSE: KSS) stock price history over the last 5 years
Kohl's (KSS) stock vs Kroger Company (KR) vs Walmart (WMT) stock over the last 5 years
The image below shows the stock price performance of Kohl's (KSS), Kroger (KR) and Walmart (WMT) over the last 5 years. The summary below shows the returns provided by the two retailers over the last 5 years
So the stock of Walmart has easily outperformed that of Kohl's and Kroger over the last 5 years.
- Walmart (WMT): 147.34%
- Kroger (KR): -23.79%
- Kohl's (KSS): -37.6%
So the stock of Walmart has easily outperformed that of Kohl's and Kroger over the last 5 years.
Kohl's (KSS) stock vs Kroger Company (KR) stock over the last 5 years
Recent coverage of Kohl's (KSS)
The extract below covers the latest regarding Kohl's as obtained from CNBC.com
Kohl’s shares rose more than 5% Tuesday, after Chief Executive Michelle Gass laid out the retailer’s plans to expand in activewear and personal care in 2021, two hot pockets of growth that have accelerated during the coronavirus pandemic.
Kohl’s reported a 13.3% decline in quarterly net sales during its third quarter, as the pandemic limited the number of people visiting its stores to buy work clothes and dress shoes. But the department store chain sparked hope about its chances for a stronger turnaround in the New Year.
“Some would call this the homebody economy, with people spending more time at home,” Gass said during a call with reporters. “It’s growing in importance. ... And we’ve established ourselves as an active destination for the last five years, that we’re going to take to a whole new level.”
Kohl’s also said it is entering the holidays “well-positioned” to rival its peers and take advantage of the market share up for grabs in the wake of numerous retail bankruptcies and store closures this year. The retailer significantly cut its inventories during the latest quarter, putting it in a position where it will be less reliant on discounts during the holiday season.
Read the full article here
Kohl’s shares rose more than 5% Tuesday, after Chief Executive Michelle Gass laid out the retailer’s plans to expand in activewear and personal care in 2021, two hot pockets of growth that have accelerated during the coronavirus pandemic.
Kohl’s reported a 13.3% decline in quarterly net sales during its third quarter, as the pandemic limited the number of people visiting its stores to buy work clothes and dress shoes. But the department store chain sparked hope about its chances for a stronger turnaround in the New Year.
“Some would call this the homebody economy, with people spending more time at home,” Gass said during a call with reporters. “It’s growing in importance. ... And we’ve established ourselves as an active destination for the last five years, that we’re going to take to a whole new level.”
Kohl’s also said it is entering the holidays “well-positioned” to rival its peers and take advantage of the market share up for grabs in the wake of numerous retail bankruptcies and store closures this year. The retailer significantly cut its inventories during the latest quarter, putting it in a position where it will be less reliant on discounts during the holiday season.
Read the full article here
Kohl's store entrance inside a mall. Image obtained from Greenwichtime.com
Kohl's (NYSE: KSS) latest stock valuation
So what is Kohl's stock worth based on their 3rd quarter 2020 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for Kohl's at $39.60 a stock. We therefore believe the stock of Kohl's is undervalued
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $39.60 thus a good entry point into Kohl's would be at $35.70 or below.
We expect the stock of Kohl's stock price to recover in coming weeks and months as the Covid-19 pandemic subsides to levels closer to our target price (full value price). Since the stock of Kohl's is trading at well below our suggested entry point we rate the stock of Kohl's as a Buy
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $39.60 thus a good entry point into Kohl's would be at $35.70 or below.
We expect the stock of Kohl's stock price to recover in coming weeks and months as the Covid-19 pandemic subsides to levels closer to our target price (full value price). Since the stock of Kohl's is trading at well below our suggested entry point we rate the stock of Kohl's as a Buy
Next earnings release for Kohl's
It is expected that Kohl's will release their 4th quarter 2020 earnings report towards the end of February 2021