Kohl's Corporation Reports Financial Results
Annual comparable sales(1) increase 1.7%, fourth quarter comparable sales increase 1.0%
Annual diluted earnings per share of $4.84
Adjusted diluted earnings per share(2) of $5.60, exceed the high end of guidance by $0.05 per share
MENOMONEE FALLS, Wis.--(BUSINESS WIRE)—March 5, 2019-- Kohl’s Corporation (NYSE:KSS) today reported results for the quarter and year ended February 2, 2019.
"The positive momentum we've had all year continued as we achieved a 1 percent comp sales increase for the fourth quarter, resulting in a 1.7 percent increase for the year," said Michelle Gass, Kohl's chief executive officer. "Building on the exceptional holiday we had in 2017, we've now achieved a 7 percent increase in the fourth quarter on a two-year basis."
"With a clear focus on driving traffic and operating with discipline, the Company is delivering sales growth while also improving profitability. We are financially strong and our overall health in the business is positioning us well for continued success," Gass continued. "I want to thank all of our Kohl's associates for another successful year of strong execution and great performance. Moreover, I thank them for their commitment to providing an engaging, enjoyable experience to our customers."
Operational Update
As the Company disclosed in an SEC filing in early January, it took several actions in the fourth quarter as part of its Operational Excellence initiatives. The Company will close four underperforming stores in April, but will open four new smaller format stores later in the year. It is consolidating call center locations which support both its Kohl’s Charge and online customers. Additionally, the Company offered a voluntary retirement program to qualified hourly associates and impaired certain assets.
These actions are expected to generate annual SG&A savings of approximately $20 million dollars and annual depreciation savings of approximately $5 million dollars. The Company incurred $104 million dollars in pretax charges in the fourth quarter as a result of these actions and estimate that approximately $50-55 million dollars of additional charges will be recorded in the first quarter of 2019. Most of the 2019 charges will be related to future lease commitments at the four stores that will be closing.
Additionally, the Company retired $413 million dollars of debt in the fourth quarter and reported a $21 million dollar loss on extinguishment of debt. Combined with the tender offer in the first quarter and additional open market debt repurchases, the Company reduced its outstanding debt by over $900 million dollars and extended the remaining maturity of the portfolio an additional two years. The debt reduction is expected to decrease annual interest expense by approximately $45 million dollars.
Dividend
On February 27, 2019, Kohl's Board of Directors declared a quarterly cash dividend on the Company's common stock of $0.67 per share, a 10% increase over its prior dividend. The dividend is payable April 3, 2019 to shareholders of record at the close of business on March 20, 2019.
Store Update
Kohl's ended the fiscal year with 1,159 Kohl's stores in 49 states. During 2018, the Company opened one Kohl's store and relocated two Kohl's stores.
Initial 2019 Earnings Guidance
The Company expects earnings per diluted share of $5.80 to $6.15 for fiscal 2019. This guidance is based on the following assumptions which includes the impact of the new lease standard, but excludes any non-recurring charges:
Comparable sales change of 0% to 2.0%
Gross margin as a percentage of sales increase up to 10 basis points over 2018
SG&A dollars increase 1% to 2% over 2018. Excluding the impact of lease accounting, SG&A dollars are expected to increase 0.5% to 1.5%
Depreciation expense of $930 million, which includes a $25 million dollar benefit from lease accounting
Interest expense of $200 million, which includes a $10 million dollar benefit from lease accounting
Effective tax rate of 24% to 25%
Share repurchases of $400-$500 million
Fourth Quarter 2018 Earnings Conference Call
Kohl's will host its quarterly earnings conference call at 9:00 am ET on March 5, 2019. 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 445967. 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 2019 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. Forward-looking statements relate to the date initially made, and Kohl’s undertakes no obligation to update them.
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 proprietary brands, incredible savings and an easy shopping experience in our stores, online at Kohls.com and on Kohl's mobile app. Since its founding, Kohl's has given more than $700 million to support communities nationwide, with a focus on family health and wellness. 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.
