Kohl's Reports Second Quarter Fiscal 2022 Financial Results
Kohl’s Corporation (NYSE:KSS) today reported results for the quarter ended July 30, 2022.
|
|
Three Months |
Six Months |
||||||||||||||||
|
($ in millions, except per share data) |
July 30, 2022 |
July 31, 2021 |
Change |
July 30, 2022 |
July 31, 2021 |
Change |
||||||||||||
|
Total revenue |
$ |
4,087 |
|
$ |
4,447 |
|
|
(8.1 |
%) |
$ |
7,802 |
|
$ |
8,334 |
|
|
(6.4 |
%) |
|
Net sales(1) |
|
(8.5 |
%) |
|
31.4 |
% |
|
|
|
|
(7.0 |
%) |
|
46.8 |
% |
|
|
|
|
Gross margin |
|
39.6 |
% |
|
42.5 |
% |
(290) bps |
|
|
39.0 |
% |
|
40.9 |
% |
(189) bps |
|
||
|
Selling, general, and administrative expenses |
$ |
1,283 |
|
$ |
1,241 |
|
|
3.4 |
% |
$ |
2,576 |
|
$ |
2,411 |
|
|
6.8 |
% |
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
143 |
|
$ |
382 |
|
|
(63 |
%) |
$ |
157 |
|
$ |
396 |
|
|
(60 |
%) |
|
Diluted earnings per share |
$ |
1.11 |
|
$ |
2.48 |
|
|
(55 |
%) |
$ |
1.22 |
|
$ |
2.55 |
|
|
(52 |
%) |
|
Non-GAAP(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income |
$ |
143 |
|
$ |
382 |
|
|
(63 |
%) |
$ |
157 |
|
$ |
547 |
|
|
(71 |
%) |
|
Adjusted diluted earnings per share |
$ |
1.11 |
|
$ |
2.48 |
|
|
(55 |
%) |
$ |
1.22 |
|
$ |
3.52 |
|
|
(65 |
%) |
|
(1) |
Represents change in Net sales vs. prior year period. |
|
(2) |
Amounts shown for the three and six months ended July 30, 2022 and the three months ended July 31, 2021 are GAAP as there are no adjustments to Non-GAAP. These amounts are shown for comparability purposes. |
“Second quarter results were impacted by a weakening macro environment, high inflation and dampened consumer spending, which especially pressured our middle-income customers. We have adjusted our plans, implementing actions to reduce inventory and lower expenses to account for a softer demand outlook. Kohl’s has navigated difficult periods in the past and I am confident in our ability to successfully manage through the current uncertainty. I want to thank our incredible associates around the country for their commitment to Kohl’s and for providing excellent service to our customers every day. We continue to execute on our transformation strategy and are pleased to deliver outsized performance in the nearly 600 stores which have been refreshed and elevated, featuring Sephora as a key cornerstone,” said Michelle Gass, Kohl’s chief executive officer.
“While 2022 has turned out to be more challenging than initially expected, Kohl’s remains a financially strong company with significant long-term growth potential. Our $500 million accelerated share repurchase underscores our steadfast confidence in Kohl’s future and focus on creating shareholder value. We also remain firmly committed to our current dividend,” said Gass.
Updated 2022 Financial Outlook
The Company is updating its full year 2022 financial outlook to include the following:
- Net sales is now expected to decline in the range of (5%) to (6%) as compared to the prior year
- Operating margin is now expected to be in the range of 4.2% to 4.5%
- Earnings per share is now expected to be in the range of $2.80 to $3.20, excluding any non-recurring charges
Accelerated Share Repurchase Agreement
On August 18, 2022, the Company entered into an accelerated share repurchase agreement (ASR), pursuant to its previously announced share repurchase program, to repurchase approximately $500 million of the Company’s common stock.
Dividend
As previously announced, on August 9, 2022, Kohl’s Board of Directors declared a quarterly cash dividend on the Company’s common stock of $0.50 per share. The dividend is payable September 21, 2022 to shareholders of record at the close of business on September 7, 2022.
Second Quarter 2022 Earnings Conference Call
Kohl’s will host its quarterly earnings conference call at 9:00 am ET on August 18, 2022. A webcast of the conference call and the related presentation materials will be available via the Company's web site at investors.kohls.com, both live and after the call.
Cautionary Statement Regarding Forward-Looking Information and Non-GAAP Measures
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Company intends forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “anticipates,” “plans,” or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause the Company’s actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, risks described more fully in Item 1A in the Company’s Annual Report on Form 10-K and Item 1A of Part II of the Company’s Quarterly Report on Form 10-Q for the first quarter of fiscal 2022, which are expressly incorporated herein by reference, and other factors as may periodically be described in the Company’s filings with the SEC. Forward-looking statements relate to the date initially made, and Kohl’s undertakes no obligation to update them.
In this press release, the Company provides information regarding adjusted net income and adjusted diluted earnings per share, which are not recognized terms under U.S. generally accepted accounting principles (“GAAP”) and do not purport to be alternatives to net income as a measure of operating performance. A reconciliation of adjusted net income and adjusted diluted earnings per share is provided in this release. The Company believes that the use of these non-GAAP financial measures provides investors with enhanced visibility into its results with respect to the impact of certain costs. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies.
About Kohl's
Kohl’s (NYSE: KSS) is a leading omnichannel retailer. With more than 1,100 stores in 49 states and the online convenience of Kohls.com and the Kohl's App, Kohl's offers amazing national and exclusive brands at incredible savings for families nationwide. Kohl’s is uniquely positioned to deliver against its strategy and its vision to be the most trusted retailer of choice for the active and casual lifestyle. Kohl’s is committed to progress in its diversity and inclusion pledges, and the company's environmental, social and corporate governance (ESG) stewardship. For a list of store locations or to shop online, visit Kohls.com. For more information about Kohl’s impact in the community or how to join our winning team, visit Corporate.Kohls.com or follow @KohlsNews on Twitter.
|
KOHL’S CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
|
||||||||||||
|
|
Three Months Ended |
Six Months Ended |
||||||||||
|
(Dollars in Millions, Except per Share Data) |
July 30, 2022 |
July 31, 2021 |
July 30, 2022 |
July 31, 2021 |
||||||||
|
Net sales |
$ |
3,863 |
|
$ |
4,223 |
|
$ |
7,334 |
|
$ |
7,885 |
|
|
Other revenue |
|
224 |
|
|
224 |
|
|
468 |
|
|
449 |
|
|
Total revenue |
|
4,087 |
|
|
4,447 |
|
|
7,802 |
|
|
8,334 |
|
|
Cost of merchandise sold |
|
2,332 |
|
|
2,426 |
|
|
4,472 |
|
|
4,659 |
|
|
Gross margin rate |
|
39.6 |
% |
|
42.5 |
% |
|
39.0 |
% |
|
40.9 |
% |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and administrative |
|
1,283 |
|
|
1,241 |
|
|
2,576 |
|
|
2,411 |
|
|
As a percent of total revenue |
|
31.4 |
% |
|
27.9 |
% |
|
33.0 |
% |
|
28.9 |
% |
|
Depreciation and amortization |
|
206 |
|
|
210 |
|
|
406 |
|
|
421 |
|
|
Operating income |
|
266 |
|
|
570 |
|
|
348 |
|
|
843 |
|
|
Interest expense, net |
|
77 |
|
|
62 |
|
|
145 |
|
|
129 |
|
|
Loss on extinguishment of debt |
|
— |
|
|
— |
|
|
— |
|
|
201 |
|
|
Income before income taxes |
|
189 |
|
|
508 |
|
|
203 |
|
|
513 |
|
|
Provision for income taxes |
|
46 |
|
|
126 |
|
|
46 |
|
|
117 |
|
|
Net income |
$ |
143 |
|
$ |
382 |
|
$ |
157 |
|
$ |
396 |
|
|
Average number of shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
127 |
|
|
152 |
|
|
127 |
|
|
153 |
|
|
Diluted |
|
128 |
|
|
154 |
|
|
129 |
|
|
155 |
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
1.13 |
|
$ |
2.51 |
|
$ |
1.24 |
|
$ |
2.58 |
|
|
Diluted |
$ |
1.11 |
|
$ |
2.48 |
|
$ |
1.22 |
|
$ |
2.55 |
|
|
ADJUSTED NET INCOME AND DILUTED EARNINGS PER SHARE, NON-GAAP FINANCIAL MEASURES (Unaudited)
|
||||||||||||
|
|
Three Months Ended |
Six Months Ended |
||||||||||
|
(Dollars in Millions, Except per Share Data) |
July 30, 2022 |
July 31, 2021 |
July 30, 2022 |
July 31, 2021 |
||||||||
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP |
$ |
143 |
|
$ |
382 |
|
$ |
157 |
|
$ |
396 |
|
|
Loss on extinguishment of debt |
|
— |
|
|
— |
|
|
— |
|
|
201 |
|
|
Income tax impact of items noted above |
|
— |
|
|
— |
|
|
— |
|
|
(50) |
|
|
Adjusted (non-GAAP) |
$ |
143 |
|
$ |
382 |
|
$ |
157 |
|
$ |
547 |
|
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP |
$ |
1.11 |
|
$ |
2.48 |
|
$ |
1.22 |
|
$ |
2.55 |
|
|
Loss on extinguishment of debt |
|
— |
|
|
— |
|
|
— |
|
|
1.29 |
|
|
Income tax impact of items noted above |
|
— |
|
|
— |
|
|
— |
|
|
(0.32) |
|
|
Adjusted (non-GAAP)(1) |
$ |
1.11 |
|
$ |
2.48 |
|
$ |
1.22 |
|
$ |
3.52 |
|
|
(1) |
Amounts shown for the three and six months ended July 30, 2022 and the three months ended July 31, 2021 are GAAP as there are no adjustments to Non-GAAP. These amounts are shown for comparability purposes. |
|
KOHL’S CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited)
|
||||||
|
(Dollars in Millions) |
July 30, 2022 |
July 31, 2021 |
||||
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
222 |
|
$ |
2,569 |
|
|
Merchandise inventories |
|
4,034 |
|
|
2,733 |
|
|
Other |
|
374 |
|
|
356 |
|
|
Total current assets |
|
4,630 |
|
|
5,658 |
|
|
Property and equipment, net |
|
8,228 |
|
|
7,107 |
|
|
Operating leases |
|
2,296 |
|
|
2,301 |
|
|
Other assets |
|
469 |
|
|
440 |
|
|
Total assets |
$ |
15,623 |
|
$ |
15,506 |
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
$ |
1,497 |
|
$ |
1,495 |
|
|
Accrued liabilities |
|
1,426 |
|
|
1,554 |
|
|
Borrowings under revolving credit facility |
|
79 |
|
|
— |
|
|
Current portion of: |
|
|
|
|
|
|
|
Long-term debt |
|
164 |
|
|
— |
|
|
Finance leases and financing obligations |
|
96 |
|
|
117 |
|
|
Operating leases |
|
108 |
|
|
143 |
|
|
Total current liabilities |
|
3,370 |
|
|
3,309 |
|
|
Long-term debt |
|
1,747 |
|
|
1,909 |
|
|
Finance leases and financing obligations |
|
2,830 |
|
|
1,906 |
|
|
Operating leases |
|
2,568 |
|
|
2,532 |
|
|
Deferred income taxes |
|
194 |
|
|
245 |
|
|
Other long-term liabilities |
|
370 |
|
|
386 |
|
|
Shareholders' equity |
|
4,544 |
|
|
5,219 |
|
|
Total liabilities and shareholders' equity |
$ |
15,623 |
|
$ |
15,506 |
|
|
KOHL’S CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
||||||
|
|
Six Months Ended |
|||||
|
(Dollars in Millions) |
July 30, 2022 |
July 31, 2021 |
||||
|
Operating activities |
|
|
|
|
|
|
|
Net income |
$ |
157 |
|
$ |
396 |
|
|
Adjustments to reconcile net income to net cash |
|
|
|
|
|
|
|
(used in) provided by operating activities: |
||||||
|
Depreciation and amortization |
|
406 |
|
|
421 |
|
|
Share-based compensation |
|
26 |
|
|
25 |
|
|
Deferred income taxes |
|
(12 |
) |
|
(57 |
) |
|
Loss on extinguishment of debt |
|
— |
|
|
201 |
|
|
Non-cash lease expense |
|
56 |
|
|
74 |
|
|
Other non-cash expenses |
|
5 |
|
|
9 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Merchandise inventories |
|
(964) |
|
|
(138) |
|
|
Other current and long-term assets |
|
(29) |
|
|
590 |
|
|
Accounts payable |
|
(185) |
|
|
19 |
|
|
Accrued and other long-term liabilities |
|
51 |
|
|
228 |
|
|
Operating lease liabilities |
|
(57 |
) |
|
(76 |
) |
|
Net cash (used in) provided by operating activities |
|
(546) |
|
|
1,692 |
|
|
Investing activities |
|
|
|
|
|
|
|
Acquisition of property and equipment |
|
(548 |
) |
|
(191 |
) |
|
Proceeds from sale of real estate |
|
4 |
|
|
4 |
|
|
Net cash used in investing activities |
|
(544 |
) |
|
(187 |
) |
|
Financing activities |
|
|
|
|
|
|
|
Proceeds from issuance of debt |
|
— |
|
|
500 |
|
|
Net borrowings under revolving credit facility |
|
79 |
|
|
— |
|
|
Deferred financing costs |
|
— |
|
|
(5 |
) |
|
Treasury stock purchases |
|
(158 |
) |
|
(301 |
) |
|
Shares withheld for taxes on vested restricted shares |
|
(20 |
) |
|
(25 |
) |
|
Dividends paid |
|
(127 |
) |
|
(77 |
) |
|
Reduction of long-term borrowings |
|
— |
|
|
(1,044 |
) |
|
Premium paid on redemption of debt |
|
— |
|
|
(192 |
) |
|
Finance lease and financing obligation payments |
|
(55 |
) |
|
(65 |
) |
|
Proceeds from financing obligations |
|
5 |
|
|
4 |
|
|
Proceeds from stock option exercises |
|
1 |
|
|
1 |
|
|
Other |
|
— |
|
|
(3) |
|
|
Net cash used in financing activities |
|
(275) |
|
|
(1,207) |
|
|
Net (decrease) increase in cash and cash equivalents |
|
(1,365) |
|
|
298 |
|
|
Cash and cash equivalents at beginning of period |
|
1,587 |
|
|
2,271 |
|
|
Cash and cash equivalents at end of period |
$ |
222 |
|
$ |
2,569 |
|
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