Market Overview

Kohl's Corporation Reports Financial Results

Share:
  • Comparable sales increase 6.3%
  • Reports annual diluted earnings per share of $5.12
  • Excluding tax reform benefits, diluted earnings per share were $4.31,
    exceeding the high end of guidance by $0.11 per share

Kohl's Corporation (NYSE:KSS) today reported results for the quarter and
year ended February 3, 2018.

       
Three Months     Twelve Months
($ in millions)     2017     2016     Change     2017     2016     Change
Total sales $ 6,776     $ 6,205       9.2 % $ 19,095     $ 18,686       2.2 %
Comparable store sales(1) 6.3 % (2.2 ) % 1.5 % (2.4 ) %
Gross margin 33.8 % 33.4 % 43 bps 36.2 % 36.1 % 15 bps
Selling, general, and administrative expenses $ 1,459 $ 1,360 7.3 % $ 4,512 $ 4,435 1.7 %
Diluted earnings per share
Reported $ 2.81 $ 1.44 95 % $ 5.12 $ 3.11 65 %
Excluding tax reform and store closures     $ 1.99       $ 1.44           38 %     $ 4.31       $ 3.76           15 %

(1) Compares the periods ended January 27, 2018 to the
periods ended January 28, 2017.

 

Kevin Mansell, Kohl's chairman, chief executive officer and president,
said, "I am very pleased with our fourth quarter and full year results,
which exceeded the high end of our most recent guidance by $0.11 per
share. Over the course of the year, we saw consistent, sustained
improvement in sales trends which culminated in a 6.3% increase in our
fourth quarter comp sales. We improved our merchandise margins through
strong inventory management and improved promotional and permanent
markdowns. All areas effectively managed their expenses. And, we ended
the year with 7% less inventory. I am very proud of our team and the
role they played in these results and want to thank them for their hard
work, loyalty and dedication."

Impact of 53rd Week

The retail calendar for fiscal January 2018 included a fifth week,
resulting in a 14-week fiscal fourth quarter and a 53-week year. During
this 53rd week, total sales were approximately $170 million;
selling, general and administrative expenses were approximately $30
million; and interest was approximately $3 million. The 53rd
week increased the Company's net income by approximately $15 million and
its diluted earnings per share by approximately $0.10 for the year.

Dividend

On February 28, 2018, Kohl's Board of Directors declared a quarterly
cash dividend on the Company's common stock of $0.61 per share, an 11%
increase over its prior dividend. The dividend is payable March 28,
2018 to shareholders of record at the close of business on March 14,
2018.

Store Update

Kohl's ended the fiscal year with 1,158 Kohl's stores in 49 states.
During 2017, the Company opened four Kohl's stores, relocated one Kohl's
store and opened one Off/Aisle location.

Initial 2018 Earnings Guidance

The Company expects earnings per diluted share of $4.95 to $5.45 for
fiscal 2018. This guidance is based on the following assumptions:

  • Comparable sales change of 0% to 2%
  • Total sales change of (1)% to 1%
  • Gross margin as a percentage of sales increase of 5 to 10 basis points
    over 2017
  • SG&A dollars increase of 1% to 2% over 2017
  • Depreciation expense of $960 million
  • Interest expense of $280 million
  • Effective tax rate of 24% to 25%
  • $300-$400 million in share repurchases
  • Capital expenditures of approximately $700 million

Kohl's plans to shift its earnings reporting cadence in fiscal 2018 and
expects to report its first quarter 2018 financial results during the
week of May 20, 2018.

Fourth Quarter 2017 Earnings Conference Call

Kohl's will host its quarterly earnings conference call at 8:30 am ET on
March 1, 2018. The phone number for the conference call is (800)
230-1085. Replays of the call will be available for 30 days by dialing
(800) 475-6701. The conference ID is 444352. The conference call and
replays are also accessible via the Company's web site at http://corporate.kohls.com/investors/events-and-presentations.

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,
including 2018 earnings guidance. Kohl's 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 Kohl's actual results to differ
materially from those anticipated by the forward-looking statements.
These risks and uncertainties include, but are not limited to, those
described in Item 1A in Kohl's Annual Report on Form 10-K, which is
expressly incorporated herein by reference, and other factors as may
periodically be described in Kohl's filings with the SEC.

About Kohl's

Kohl's (NYSE:KSS) is a leading omnichannel retailer with more than
1,100 stores in 49 states. With a commitment to inspiring and empowering
families to lead fulfilled lives, Kohl's offers amazing national and
exclusive brands, incredible savings and an easy shopping experience in
our stores, online at Kohls.com
and on Kohl's mobile app. Throughout its history, Kohl's has given
nearly $600 million to support communities nationwide. 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 INCOME

(Unaudited)

       
Three Months     Twelve Months
Feb 3,     Jan 28, Feb 3,     Jan 28,
2018 2017 2018 2017
(Dollars in Millions, Except per Share Data)     (14 Weeks)     (13 Weeks)     (53 Weeks)     (52 Weeks)
Net sales $ 6,776 $ 6,205 $ 19,095 $ 18,686
Cost of merchandise sold       4,483         4,133         12,176         11,944  
Gross margin 2,293 2,072 6,919 6,742
As a percent of net sales 33.8 % 33.4 % 36.2 % 36.1 %
Operating expenses:
Selling, general, and administrative 1,459 1,360 4,512 4,435
As a percent of net sales 21.5 % 21.9 % 23.6 % 23.7 %
Depreciation and amortization 267 239 991 938
Impairments, store closing and other costs                               186  
Operating income 567 473 1,416 1,183
Interest expense, net       74         75         299         308  
Income before income taxes 493 398 1,117 875
Provision for income taxes       25         146         258         319  
Net income     $ 468       $ 252       $ 859       $ 556  
 
Average number of shares:
Basic 165 174 167 178
Diluted 167 175 168 179
Earnings per share:
Basic $ 2.83 $ 1.45 $ 5.14 $ 3.12
Diluted     $ 2.81       $ 1.44       $ 5.12       $ 3.11  
 
 
ADJUSTED NET INCOME AND DILUTED EARNINGS PER SHARE, NON-GAAP
FINANCIAL MEASURES

(Unaudited)

       
Three Months     Twelve Months
Feb 3,     Jan 28, Feb 3,     Jan 28,
2018 2017 2018 2017
(Dollars in Millions, Except per Share Data)     (14 Weeks)     (13 Weeks)     (53 Weeks)     (52 Weeks)
Net income
GAAP $ 468 $ 252 $ 859 $ 556
Tax reform (136 ) - (136 ) -
Store closures       -         -         -         117
Excluding tax reform and store closures (non-GAAP) 332 252 723 673
State tax settlement       (20 )       -         (20 )       -
Adjusted (non-GAAP)     $ 312       $ 252       $ 703       $ 673
 
Diluted earnings per share
GAAP $ 2.81 $ 1.44 $ 5.12 $ 3.11
Tax reform (0.82 ) - (0.81 ) -
Store closures       -         -         -         0.65
Excluding tax reform and store closures (non-GAAP) 1.99 1.44 4.31 3.76
State tax settlement       (0.12 )       -         (0.12 )       -
Adjusted (non-GAAP)     $ 1.87       $ 1.44       $ 4.19       $ 3.76
 
 
KOHL'S CORPORATION
CONSOLIDATED BALANCE SHEETS

(Unaudited)

       
February 3, January 28,
(Dollars in Millions)     2018     2017
Assets
Current assets:
Cash and cash equivalents $ 1,308 $ 1,074
Merchandise inventories 3,542 3,795
Other       481       378
Total current assets 5,331 5,247
Property and equipment, net 7,773 8,103
Other assets       236       224
Total assets     $ 13,340     $ 13,574
 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 1,271 $ 1,507
Accrued liabilities 1,155 1,224
Income taxes payable 99 112
Current portion of capital lease and financing obligations       126       131
Total current liabilities 2,651 2,974
Long-term debt 2,797 2,795
Capital lease and financing obligations 1,591 1,685
Deferred income taxes 213 272
Other long-term liabilities 662 671
Shareholders' equity       5,426       5,177
Total liabilities and shareholders' equity     $ 13,340     $ 13,574
 
KOHL'S CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

       
2017 2016
(Dollars in Millions)     (53 Weeks)     (52 Weeks)
Operating activities
Net income $ 859 $ 556
Adjustments to reconcile net income to net cash provided

by operating activities:

Depreciation and amortization 991 938
Share-based compensation 55 41
Deferred income taxes (61 ) 13
Impairments, store closing and other costs - 57
Other non-cash revenues and expenses 2 30
Changes in operating assets and liabilities:
Merchandise inventories 264 249
Other current and long-term assets (83 ) (45 )
Accounts payable (236 ) 256
Accrued and other long-term liabilities (50 ) 81
Income taxes       (50 )       (23 )
Net cash provided by operating activities       1,691         2,153  
 
Investing activities
Acquisition of property and equipment (672 ) (768 )
Other       23         12  
Net cash used in investing activities       (649 )       (756 )
 
Financing activities
Treasury stock purchases (306 ) (557 )
Shares withheld for restricted shares (14 ) (17 )
Dividends paid (368 ) (358 )
Proceeds from financing obligations 11
Capital lease and financing obligation payments (138 ) (127 )
Proceeds from stock option exercises       18         18  
Net cash used in financing activities       (808 )       (1,030 )
Net increase in cash and cash equivalents 234 367
Cash and cash equivalents at beginning of period       1,074         707  
Cash and cash equivalents at end of period     $ 1,308       $ 1,074  
 

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