What Kohl's Didn't Say Sent Investors Fleeing

In a statement released Thursday morning, department store retailer Kohl’s Corp. (NYSE: KSS) reported that November and December same-store sales dipped by 0.2% year over year. This is not the sort of news investors like to hear.

Particularly because the holiday retail shopping season was, by most accounts, pretty good. But the lion’s share of the increase in consumer retail spending went to online sales. Sales at brick-and-mortar stores rose 1.2% during the 2019 holiday season, according to Mastercard Spending Pulse data. E-commerce sales rose by 19%, and total sales rose 3.4%.

Among department stores, overall sales fell by 1.8% and online sales rose by 6.9% year over year. On Wednesday, Macy’s Inc. (NYSE: M) reported that 2019 holiday same-store sales were down 0.7%. But Macy’s also said that it planned to close 29 stores over the next few weeks. Kohl’s made no such promise.

Instead, Kohl’s CEO Michelle Gass commented that the company is “managing the business with discipline” and that Kohl’s will “deliver on its earnings guidance for the full year.” However, the guidance now calls for full-year profits per share at the low end of the $4.75 to $4.95 range. Analysts had a consensus estimate of $4.83 for full-year earnings.

Both Macy’s and Kohl’s were among the worst-performing retailer stocks of last year. Macy’s shares plunged more than 40% in 2019, and Kohl’s shares dropped by more than 20%.

CEO Gass also teased the company’s March 16 Investor Day: “As we look ahead, we are committed to driving innovation and bringing new experiences to both our existing and new customers.  We look forward to sharing additional details on our key growth initiatives at our upcoming investor day.”

Those are not exactly soul-stirring words to investors because they’re too hard to interpret. Closing stores and firing employees, those are easy to understand and generally produce the results (higher returns) that investors seek.

Macy’s stock, arguably a worse performer than Kohl’s, rose about 2.4% on Wednesday, after announcing lower same-store sales and store closings.

Kohl’s shares traded down about 1.6% on Wednesday to close at $49.38, and they traded down almost 7% in Thursday’s premarket session at $46.00. The stock’s 52-week range is $43.33 to $75.91, and the 12-month consensus price target is $49.81.

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