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Kohl's (KSS) Q4 Earnings & Sales Increase Y/Y, Stock Gains

Kohl’s Corporation KSS posted fourth-quarter fiscal 2017 results, wherein both the top and the bottom line improved year over year and topped the Zacks Consensus Estimate. While this marked Kohl’s third consecutive sales beat, earnings reverted to the positive surprise track after delivering a miss in the previous quarter.

Notably, shares of the company were up approximately 4% during the pre-market trading hours. Moreover, this Zacks Rank #1 (Strong Buy) stock has rallied 57.4% in a year, crushing the industry’s 11.5% growth.



Adjusted earnings per share of $1.87 surpassed the Zacks Consensus Estimate of $1.77 and jumped 29.9% from $1.44 recorded in the year-ago period. Including the impact of state tax settlement, earnings soared about 38% to $1.99 per share. On a reported basis, earnings jumped considerably to $2.81 per share.

The bottom line was backed by solid sales and enhanced gross margin. Also, earnings gained from an additional week in the fourth quarter of this fiscal year.

Sales and Margins

Fourth-quarter net sales came in at $6,776 million, which beat the Zacks Consensus Estimate of $6,737 million and advanced 9.2% year over year. Sales benefited from an additional week, wherein the company generated roughly $170 million in total sales.

Further, comparable store sales (comps) rose 6.3% against a 2.2% dip recorded in the year-ago period. It looks like the company’s strategic initiative, Greatness Agenda, is yielding results. The initiative, which commenced in first-quarter 2014, was designed to drive transactions per store and sales.

Gross margin expanded 43 basis points to 33.8% in the reported quarter. Selling, general and administrative expenses increased 7.3% to $1,459 million.

However, management remains pleased with its improved merchandise margins, which in turn was a result of efficient inventory management and better promotional and permanent markdowns. Notably, the company ended fiscal 2017 with inventory down 7% year over year. Also, expenses were managed well across all business areas.

Other Financial Details

Kohl’s ended the quarter with cash and cash equivalents of $1,308 million, long-term debt of $2,797 million and shareholders’ equity of $5,426 million. Cash flow from operations amounted to $1,691 million during the fiscal.

On Feb 28, Kohl's declared an 11% hike in its quarterly cash dividend, taking it from 55 cents per share to 61 cents. The new dividend is payable on Mar 28 to shareholders of record as of Mar 14.

The company opened four new stores, while it relocated one namesake store during fiscal 2017. Also, it opened an Off/Aisle location during the same time period. Kohl’s ended fiscal 2017 with 1,158 stores across 49 states.

Guidance

Management remains impressed with its solid sales trends and better-than-expected results in fiscal 2017. For fiscal 2018, the company anticipates comps growth in the range of flat to a rise of 2%, while sales growth is expected in a band of negative 1% to positive 1%.

Further, gross margin is anticipated to rise 10 bps from fiscal 2017, whereas SG&A expenses are estimated to grow in the 1-2% range. Also, management expects interest costs of $280 million and an effective tax rate between 24% and 25%. Consequently, Kohl’s envisions earnings for fiscal 2018 in the range of $4.95-$5.45 per share.

Kohl’s projects capital expenditures for fiscal 2018 to be roughly $700 million and share buybacks of $300-$400 million.

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Walmart WMT, with a Zacks Rank #2 (Buy), flaunts a splendid comps record.

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