Kohl's Reports Second Quarter Fiscal 2023 Financial Results

August 23, 2023

Kohl’s Corporation (NYSE:KSS) today reported results for the second quarter ended July 29, 2023.

  • Net sales decreased 4.8% and comparable sales decreased 5.0%
  • Diluted earnings per share of $0.52
  • Inventory declined 14%
  • Reaffirms full year 2023 financial outlook
  • Remains committed to strengthening balance sheet and to maintaining current dividend

Tom Kingsbury, Kohl’s chief executive officer, said, “Our second quarter earnings were in line with our expectations. We maintained strong sales momentum in Sephora at Kohl’s, reduced inventory by 14%, and managed expenses tightly. Further, solid cash flow generation allowed us to reduce our borrowings in the period.”

“Many of our strategic efforts are just underway, which we expect will contribute incrementally in the back half of the year, and even more so in 2024 and beyond. We have enhanced the store experience and recently opened an additional 200 Sephora at Kohl’s shops, and are taking steps to further optimize our assortment and simplify our value strategies. Looking ahead, we are reaffirming our 2023 guidance and remain confident in our longer-term opportunity. I want to thank the entire Kohl’s team for their efforts to support and drive improved Kohl’s performance,” Kingsbury continued.

Second Quarter 2023 Results

Comparisons refer to the 13-week period ended July 29, 2023 versus the 13-week period ended July 30, 2022

  • Net sales decreased 4.8% year-over-year, to $3.7 billion, with comparable sales down 5.0%.
  • Gross margin as a percentage of net sales was 39.0%, a decrease of 61 basis points.
  • Selling, general & administrative (SG&A) expenses increased 1.6% year-over-year, to $1.3 billion. As a percentage of total revenue, SG&A expenses were 33.5%, an increase of 208 basis points year-over-year.
  • Operating income was $163 million compared to $266 million in the prior year. As a percentage of total revenue, operating income was 4.2%, a decrease of 233 basis points year-over-year.
  • Net income was $58 million, or $0.52 per diluted share. This compares to net income of $143 million, or $1.11 per diluted share in the prior year.
  • Inventory was $3.5 billion, a decrease of 14% year-over-year.
  • Operating cash flow was $430 million.

Six Months Fiscal Year 2023 Results

Comparisons refer to the 26-week period ended July 29, 2023 versus the 26-week period ended July 30, 2022

  • Net sales decreased 4.1% year-over-year, to $7.0 billion, with comparable sales down 4.7%.
  • Gross margin as a percentage of net sales was 39.0%, a decrease of 1 basis point.
  • Selling, general & administrative (SG&A) expenses decreased 1.3% year-over-year, to $2.5 billion. As a percentage of total revenue, SG&A expenses were 34.1%, an increase of 103 basis points year-over-year.
  • Operating income was $261 million compared to $348 million in the prior year. As a percentage of total revenue, operating income was 3.5%, a decrease of 96 basis points year-over-year.
  • Net income was $72 million, or $0.65 per diluted share. This compares to net income of $157 million, or $1.22 per diluted share in the prior year.
  • Operating cash flow was $228 million.

2023 Financial and Capital Allocation Outlook

For the full year 2023, the Company reaffirms its financial outlook and currently expects the following:

  • Net sales: A decrease of (2%) to (4%), includes the impact of the 53rd week which is worth approximately 1% year-over-year.
  • Operating margin: Approximately 4.0%.
  • Diluted earnings per share: In the range of $2.10 to $2.70, excluding any non-recurring charges.
  • Capital Expenditures: $600 million to $650 million, including expansion of its Sephora partnership and store refresh activity.
  • Dividend: On August 8, 2023, 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 20, 2023 to shareholders of record at the close of business on September 6, 2023.

Second Quarter 2023 Earnings Conference Call

Kohl’s will host its quarterly earnings conference call at 9:00 am ET on August 23, 2023. 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

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, 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 the Company undertakes no obligation to update them.

About Kohl's

Kohl’s (NYSE: KSS) is a leading omnichannel retailer built on a foundation that combines great brands, incredible value and convenience for our customers. Kohl's serves millions of families in our more than 1,100 stores in 49 states, online at Kohls.com, and through our Kohl's App. 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.

KOHL’S CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended

Six Months Ended

(Dollars in Millions, Except per Share Data)

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

Net sales

$ 3,678

$ 3,863

$ 7,033

$ 7,334

Other revenue

217

224

433

468

Total revenue

3,895

4,087

7,466

7,802

Cost of merchandise sold

2,242

2,332

4,289

4,472

Gross margin rate

39.0%

39.6%

39.0%

39.0%

Operating expenses:

 

 

 

 

Selling, general, and administrative

1,304

1,283

2,542

2,576

As a percent of total revenue

33.5%

31.4%

34.1%

33.0%

Depreciation and amortization

186

206

374

406

Operating income

163

266

261

348

Interest expense, net

89

77

173

145

Income before income taxes

74

189

88

203

Provision for income taxes

16

46

16

46

Net income

$ 58

$ 143

$ 72

$ 157

Average number of shares:

 

 

 

 

Basic

110

127

110

127

Diluted

111

128

111

129

Earnings per share:

 

 

 

 

Basic

$ 0.52

$ 1.13

$ 0.65

$ 1.24

Diluted

$ 0.52

$ 1.11

$ 0.65

$ 1.22

KOHL’S CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(Dollars in Millions)

July 29, 2023

July 30, 2022

Assets

 

 

Current assets:

 

 

Cash and cash equivalents

$ 204

$ 222

Merchandise inventories

3,474

4,034

Other

296

374

Total current assets

3,974

4,630

Property and equipment, net

7,945

8,228

Operating leases

2,493

2,296

Other assets

382

469

Total assets

$ 14,794

$ 15,623

Liabilities and Shareholders’ Equity

 

 

Current liabilities:

 

 

Accounts payable

$ 1,376

$ 1,497

Accrued liabilities

1,246

1,426

Borrowings under revolving credit facility

560

79

Current portion of:

 

 

Long-term debt

111

164

Finance leases and financing obligations

84

96

Operating leases

93

108

Total current liabilities

3,470

3,370

Long-term debt

1,637

1,747

Finance leases and financing obligations

2,730

2,830

Operating leases

2,777

2,568

Deferred income taxes

121

194

Other long-term liabilities

324

370

Shareholders’ equity:

3,735

4,544

Total liabilities and shareholders’ equity

$ 14,794

$ 15,623

KOHL’S CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Six Months Ended

(Dollars in Millions)

July 29, 2023

July 30, 2022

Operating activities

 

 

Net income

$ 72

$ 157

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

Depreciation and amortization

374

406

Share-based compensation

20

26

Deferred income taxes

(7)

(12)

Non-cash lease expense

48

56

Other non-cash items

(2)

5

Changes in operating assets and liabilities:

 

 

Merchandise inventories

(283)

(964)

Other current and long-term assets

61

(29)

Accounts payable

46

(185)

Accrued and other long-term liabilities

(52)

51

Operating lease liabilities

(49)

(57)

Net cash provided by (used in) operating activities

228

(546)

Investing activities

 

 

Acquisition of property and equipment

(338)

(548)

Proceeds from sale of real estate

4

4

Other

(1)

Net cash used in investing activities

(335)

(544)

Financing activities

 

 

Net borrowings under revolving credit facility

475

79

Treasury stock purchases

(158)

Shares withheld for taxes on vested restricted shares

(13)

(20)

Dividends paid

(110)

(127)

Repayment of long-term borrowings

(164)

Finance lease and financing obligation payments

(47)

(55)

Proceeds from financing obligations

17

5

Proceeds from stock option exercises

1

Net cash provided by (used in) financing activities

158

(275)

Net increase (decrease) in cash and cash equivalents

51

(1,365)

Cash and cash equivalents at beginning of period

153

1,587

Cash and cash equivalents at end of period

$ 204

$ 222

 

Investor Relations:
Mark Rupe, (262) 703-1266, mark.rupe@kohls.com

Media:
Jen Johnson, (262) 703-5241, jen.johnson@kohls.com

Source: Kohl's