Kohl's Corp (NYSE: KSS) reported Q3 earnings on Thursday after the bell. I didn't like what I saw. I couldn't find anything in there that would make me think the stock is a buy at this time. Well, there were a couple good points, but they didn't sway me.
Net revenues were pretty much flat at $3.8 billion. The bottom line came in at $0.52 per diluted share. Last year at this time, Kohl's delivered $0.61 per diluted share in net income. That's a 15% drop, and that isn't good, even if earnings beat expectations by a penny.
So, we got a flat top line and a declining bottom line. Want some more bad news? This is probably the worst metric: same-store sales decreased well over 6% for the quarter. Plus, they declined 6% for the nine-month period. As can be seen, things are getting worse for Kohl's. Same-store sales are indeed a key measure of a retailer's strength, so even though management did well in terms of gross margin and operational cash flow (the latter took a big jump, moving up 175% due to changes in working capital relating to inventories), I can't find it within me to be even remotely bullish on this business.
Like every corporate member of the mall culture, Kohl's is going to have a miserable Christmas-selling season. It's going to be hideous out there. Seriously.
And here's an interesting point from the press release: CEO Kevin Mansell actually took a couple lines in the missive to thank and acknowledge the 120,000 Kohl's associates who are working for him under these challenging conditions. In my opinion, the translation goes something like this: he's pushing them as much as he can to deliver this holiday season, and they're probably already burnt out, their collective morale down in the proverbial dumps. That might make it difficult for shoppers to receive good customer service, and that might not bode well for Kohl's.
When it comes to retail, the two names I always think of first are Wal-Mart (NYSE: WMT) and Target (NYSE: TGT). I don't generally think of Kohl's. No sense in starting now...
Disclosure: I don't own any company mentioned; positions can change at any time.
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Reader Comments (Page 1 of 1)
11-15-2008 @ 9:14PM
Jessy Scholl said...
So Kohl's is down. Big deal!!!!! Almost every store is down right now compared to last year. The only store up is Wal-Mart and that is only because of its food selling Supercenters. I don't know inventory standards for most stores but I do know this, the corporation is stocking up on lots of inventory, and if the credit crisis gets worse, Kohls is in prime position for sales because they will have more inventory built up than even Wal-Mart.
12-01-2008 @ 3:34PM
Carla said...
I am a Kohl's associate, and I agree with the comment about our morale. We are stretched to the limit. I have worked for the company for over 10 years and every year it gets worse....twice the work with half the help. And while the managers get their bonuses, we get nothing. We don't even have parties anymore. Maybe we'll get a big thank you from Mansell, but that doesn't speak to us like cash would!