Kohl’s Beats 4Q Estimates; Reinstates Dividends

Kohl’s Corporation delivered stronger-than-expected fourth-quarter results (period ended Jan. 30). Moreover, the retailer announced that it is resuming share buybacks and reinstating dividend payments.

The company’s CEO, Michelle Gass, said, “After an extraordinary year managing through the pandemic, we ended the year in a very solid financial position, and we enter 2021 with strong momentum.” Gass added, “We are committed to driving shareholder value and based on our strong financial outlook we are resuming our capital allocation strategy in 2021,”

Kohl’s (KSS) reported 4Q adjusted earnings of $2.22 a share, up about 12% year-over-year, surpassing analysts’ estimates of $1.03. Notably, adjusted EPS included an incremental tax benefit of $1.15 per share reflecting tax planning strategies.

The company reported total revenues of $6.14 billion that exceeded the consensus estimates of $5.58 billion. However, top-line declined by about 10% year-over-year. While overall revenues decreased, digital sales jumped 22% year-over-year reflecting increased penetration and growing traffic. (See Kohl’s Corporation stock analysis on TipRanks).

Kohl’s resumed its capital allocation strategy for 2021 and expects to incur $550 million to $600 million in capex. Furthermore, it announced a quarterly dividend of $0.25 per share, payable on March 31, 2021. Additionally, it plans to repurchase shares worth $200 million to $300 million in 2021.

The company also issued 2021 guidance wherein it expects net sales to grow in the mid-teens percentage range. Moreover, it projects EPS to be in the range of $2.45 to $2.95, compared to the analysts’ estimates of $2.67.

Prior to the earnings, Jefferies analyst Stephanie Wissink raised Kohl’s price target to $64.00 (12% upside potential) from $57.00 citing real estate monetization, an experienced board, and accretive merchandise actions. However, Wissink maintained a Hold rating on KSS.

Overall, the Street has a cautiously optimistic outlook on KSS stock with a Moderate Buy consensus rating based on 6 Buys, 5 Holds and 1 Sell. The average analyst price target of $53.45 implies downside potential of around 7% to current levels. KSS stock has gained about 52% over the past year.

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