Kohl's (KSS) Stock Down On Soft Holiday Comps & Guidance

Shares of Kohl's Corporation (NYSE:KSS) fell 6.5% yesterday, as it posted soft comparable sales (comps) for the months of November and December 2019, which constitutes the “holiday period.” Moreover, the holiday season results prompted management to slightly pull down its earnings guidance for fiscal 2019. These factors were enough to hurt investors’ sentiments.

Holiday Outcome & Guidance

Kohl’s holiday period comps dipped 0.2% year over year. Although the company saw strength in several key business areas like digital, beauty, active, children’s, men’s and footwear, softness in the women’s category impeded results. Management is on track to improve the performance of its women’s business, alongside focusing on innovation and enhancing consumers’ experience.

Also, industry experts believe that increased promotions and escalated digital fulfillment costs have been a threat to Kohl’s comps and margins. Additionally, the company is facing volatile customer traffic, per sources. It seems these factors and a not-so-impressive holiday season performance led management to revise its guidance for fiscal 2019. Kohl’s now envisions the fiscal 2019 bottom line to come at the lower end of its previously guided range of $4.75-$4.95 per share. The Zacks Consensus Estimate is currently pegged at $4.85.

How Other Retailers Fared

Apart from Kohl’s, a few other retailers posted a decline in comps for the 2019 holiday period. J. C. Penney Company (NYSE:JCP) reported a 7.5% drop in its holiday period comps. Comps, on an adjusted basis, fell 5.3%. At Macy’s (NYSE:M) , comps edged down 0.7% on an owned basis, and 0.6% on an owned and licensed basis. Meanwhile, comps decreased 3% for L Brands (NYSE:LB) during the same period.

Wrapping Up

Kohl’s is committed to drawing customer traffic and driving sales. To this end, the company’s digital initiatives are noteworthy. This Zacks Rank #3 (Hold) company’s investments toward boosting the capabilities of online applications have improved consumer engagement. We note that its solid endeavors to boost mobile traffic have augmented the adoption of the Kohl app, making it a vital constituent of online sales. Moreover, to improve online offerings, the company has been expanding its e-commerce fulfillment centers. Additionally, it is focusing on strengthening in-store pickups. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Management expects strength in digital sales, courtesy of the company’s innovation and expansion of online offerings. Moreover, the recent contract with Fanatics has helped Kohl’s widen its fan gear product range for online customers.

We expect such upsides combined with prudent moves to strengthen inventory position, gains from the Amazon (NASDAQ:AMZN) returns program and product launches will drive Kohl’s sales. These factors should also help uplift the stock that has lost 9% in the past three months against the industry’s growth of 3.4%.

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