Kohl’s Shares Soar 24% on Surprise Profit Beat and Raised Outlook
Cost-cutting and margin improvements offset declining sales, signaling progress in the retailer's turnaround strategy.
Kohl’s Corp. (KSS) shares surged 24% after the department store chain reported second-quarter earnings that significantly beat Wall Street expectations and raised its full-year profit forecast, providing a much-needed boost to its ongoing turnaround efforts.
The retailer posted an adjusted earnings per share of $0.56, nearly double the analyst consensus of $0.30. In response to the strong performance, Kohl's lifted its full-year adjusted EPS guidance to a range of $0.50 to $0.80, a substantial increase from its previous forecast of $0.10 to $0.60.
The positive market reaction came despite continued pressure on the top line. Kohl's reported a 5.1% decrease in net sales and a 4.2% decline in comparable sales for the quarter. However, investors focused on the company's improved profitability, which was driven by disciplined cost management and margin expansion.
Gross margin increased by 28 basis points to 39.9%, which the company attributed to a better category mix, increased sales from its proprietary brands, and strong inventory control. Selling, general, and administrative (SG&A) expenses also fell by 4.1%.
"We are pleased with our second quarter performance, which exceeded our sales expectations," said interim CEO Michael J. Bende in a statement. "Our disciplined management of the business led to gross margin expansion, inventory reduction, and lower expenses."
A key pillar of Kohl’s strategy remains its partnership with beauty retailer Sephora. The company noted it completed the full chain rollout of Sephora shop-in-shops in the spring and is on track to build a $2 billion beauty business. This initiative, along with a renewed focus on its private-label brands, is central to its efforts to attract customers and differentiate itself in a challenging retail environment.