Kohl’s (KSS) appears to remain in its own world, despite the arrival of new activist investors who are looking to shake up the department store’s difficulties outside shopping malls.
Consequently, Kohl investors must expect this beer saga to end for a long time, with a result that is far from certain.
Kohl’s said on Tuesday that fourth-quarter sales plunged 10.1% year-over-year, to $ 6.1 billion, while the retailer continued to recover from the COVID-19 pandemic. Operating profit was $ 316 million, down 21% from the previous year.
For the full year, Kohl’s saw sales drop 20% to $ 15.9 billion. The company recorded an operating loss of $ 262 million. With the help of a tax benefit of $ 1.15 per share, Kohl’s was able to beat Wall Street’s profit estimates for the quarter.
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Total sales: $ 6.1 billion versus $ 5.9 billion
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Adjusted diluted EPS: $ 2.22 vs. $ 0.98
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Guidance for the full year 2021: percentage increase in mid-teen sales and $ 2.45 to $ 2.95 in earnings per share
The shares rose 1% on Tuesday’s trading session as Kohl’s said it would reinstate its dividends (to 25 cents per share) and repurchase $ 200 million to $ 300 million in shares this year.
A Kohl’s spokesman reached a very optimistic note after a challenging quarter and year.
“Kohl’s is extremely confident in the company’s prospects,” Kohl’s spokesman said by email on Tuesday morning. “Kohl’s has made strong initial progress on its strategy over the past two quarters and is positioned to deliver multi-year improvement in sales and operating margin. Kohl’s will also resume its capital allocation strategy in 2021.”
The unlikely optimistic comment goes well with Kohl’s new activist investors. In fact, they may feel encouraged to push harder for changes in a retailer so resistant to change and without financial execution.
Unveiled last week, the activist group that attacks Kohl’s includes Macellum Advisors, Ancora Holdings, Legion Partners Asset Management and 4010 Capital. They now control a combined 9.5% stake in Kohl’s.
The group appointed nine people to Kohl’s already huge 12-person council.
They collectively criticized Kohl’s for “poor retail execution, excessive executive pay”, “long-term board with insufficient retail experience” and “systemic inability to achieve stated goals”.
A source familiar with the matter told Yahoo Finance that the sides have not met since the campaign was launched and that the two remain distant in a deal.
Kohl’s spokesman did not return Yahoo Finance’s request to comment on whether Kohl’s leadership met with the activists.
The activists – who last came together in 2019 to then shake up the terrible performance of Bed Bath & Beyond (BBBY) – seem to be well positioned in their efforts. While Kohl’s has gained favorable headlines for its partnerships with Amazon (AMZN) (for in-store returns) and, more recently, cosmetics giant Sephora, the company has simply failed to deliver on several fronts.
Operating performance is more disappointing considering that Kohl’s pure rivals, such as JC Penney and Macy’s, have closed hundreds of stores in the past five years. Theoretically, this should have pushed Kohl’s market share (something suggested in the letter).
This did not happened.
Kohl’s shares have fallen 15% in the past two years, lagging far behind the 39% gain of the S&P 500. Target’s shares soared 142% during that period. The shares of TJX Companies rose 30%. Kohl’s operating margin was negative 1.62% in 2020 (reflecting its $ 262 million operating loss), a sharp drop of 8.09% in 2015. Kohl’s management set a target for operating margins of 7% a 8%.
Brian Sozzi is a general editor and anchor on Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi is at LinkedIn.
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