Why Kohl's Stock Crushed it Today
Key Points
Sales slumped, but the company managed to narrow its net loss.
It also notched on a double beat on analyst estimates.
Veteran retailer Kohl's (NYSE: KSS) was a rather unexpected darling on the stock market on Thursday. The retailer, which has had notable struggles over the past few years, delivered a first-quarter earnings report that surprised on the upside. Investors showed their appreciation by trading the stock up by almost 21% that day.
Investors love a double beat
In the quarter, Kohl's reported net sales of $3 billion, down 1.7% year over year. That was on the back of comparable sales that fell by 1.1%. In a more promising development, its headline net loss under generally accepted accounting principles (GAAP) narrowed slightly to $14 million ($0.13 per share), from the year-ago shortfall of $15 million.
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Both figures topped analyst estimates, particularly on the bottom line. The consensus for net sales was $2.99 billion, while for per-share net loss it was $0.21.
In its earnings release, Kohl's quoted CEO Michael Bender as saying that "Our key initiatives continue to drive progressive improvements to the business, resulting in our best comparable sales performance in over four years."
"In addition, we continue to manage the business with great discipline, leading to strong expense management, cleaner inventories, and an improved balance sheet," he added.
Retail revival?
Kohl's reiterated its guidance for the full year 2026. It's forecasting that both net and comparable sales will be flat to 2% lower against 2025, while non-GAAP (adjusted) net income should range from $1 to $1.60 per share. The analyst consensus of $1.36 for the latter line item falls within the company's guidance range.
Like those bullish investors on Thursday, I see plenty to like with Kohl's results, even if net sales and "comps" are slumping.
These declines aren't enough to warrant abandoning the stock, in my view, and management is doing a decent job of reducing expenses (selling, general, and administrative costs were down by almost 2% in the quarter). Although still risky, Kohl's looks like a decent bet on a potential long-term turnaround.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.