Kohl's Reports Second Quarter Fiscal 2022 Financial Results

  • Second quarter comparable sales decrease 7.7% and net sales decrease 8.5%
  • Second quarter diluted earnings per share of $1.11
  • Updates full year 2022 financial outlook
  • Company enters into $500 million accelerated share repurchase agreement

Kohl's Corporation 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 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

 

 

Posted In: Press Releases