To The Moon

$Kohl's(KSS)$ is scheduled to hold its Q1 2025 earnings conference call on 29 May 2025, at 9:00 AM ET.

Revenue: Analysts forecast revenue to be around $3.07 billion, indicating a potential year-over-year decline of approximately 3.39%. Some sources specifically estimate net sales to reach $2.99 billion, a 6% decline from the prior year, and other revenue at $179.90 million, down 11.8%.

Earnings Per Share (EPS): The consensus EPS forecast is a loss of $-0.22. This is an improvement from the $-0.24 reported in the same quarter last year and has seen an upward revision from earlier estimates. Tipranks predict a loss of $-0.25 which is a decline from the $-0.24 reported in the same quarter last year.

Comparable Sales: Analysts expect a comparable sales decline to be at the lower end of the company's full-year guidance of -5% to -7%, with some models suggesting a 6% decline.

Net Income: Based on pre-release information, the reported net income for the fiscal quarter ending February 2025 (which is the previous quarter to the upcoming Q1 2025) was $48 million. This gives a general idea of recent profitability, though Q1 2025 is expected to be a loss.

Kohl's (KSS) Last Negative Earnings Call Saw A Significant Decline Of 36.98% In Share Price

Kohl’s had a negative earnings call on 11 March 2025 which saw its share price declined significantly by 36.98%.

While there are some positive aspects such as the strong performance of Sephora and improved gross margins, the overall sentiment is dominated by significant challenges, including declines in net sales, store closures, and underperformance in digital sales. The guidance for 2025 further reflects a cautious outlook with expected decreases in sales, indicating ongoing challenges in turning around performance.

Kohl's (KSS) Guidance

During the fourth quarter earnings call, Kohl's Corporation outlined its guidance for 2025, emphasizing a strategic turnaround that will take time to implement. The company expects net sales to decline by 5% to 7% and comparable sales to decrease by 4% to 6%. Operating margins are projected to be between 2.2% and 2.6%, with earnings per share ranging from $0.10 to $0.60. Key focus areas include enhancing the product assortment, re-establishing value and quality, and improving the omnichannel experience.

The company plans to optimize its promotional strategy, aiming for a gross margin expansion of 30 to 50 basis points. SG&A expenses are expected to decrease by 3.5% to 5%, with further cost rationalization efforts underway. Capital expenditures are projected to be between $400 million and $405 million, with a focus on completing the Sephora rollout and expanding omnichannel capabilities. Kohl's also announced a reduction in its quarterly dividend to $0.125 per share to prioritize cash balance rebuilding and debt reduction.

Factors to Watch and Strategic Initiatives

Macroeconomic Pressures and Consumer Environment: Kohl's continues to face challenges from ongoing macroeconomic uncertainty and a difficult consumer environment. Weakness in the home category, particularly "Legacy Home" offerings, has been cited as a key drag.

Gross margin in Q4 increased by 49 basis points to 32.9%, attributed to optimizing promotional events and a lower digital penetration. For the full fiscal year 2024, gross margin increased by 50 basis points to 37.2%.

Guidance for 2025 anticipates net sales to decrease by 5% to 7% and comparable sales to decrease by 4% to 6%. This reflects the time needed for strategic changes and uncertainty in the macro environment.

Sephora Partnership: The strategic partnership with Sephora is a crucial growth driver for Kohl's, aimed at increasing traffic and higher-margin sales. Investors will be looking for signs of improved Sephora sales and a clearer rollout plan.

Sephora continued to be a strong sales driver with beauty sales increasing 13% in Q4, showing an acceleration from the third quarter. This segment has successfully attracted new customers and maintained strong performance.

Inventory and Pricing Strategy: The company's ability to manage inventory and maintain price competitiveness will be key. Successful markdown management and cost control strategies in previous quarters are expected to carry into Q2.

Net sales declined 9.4% in Q4 and 7.2% for the year. Comparable sales also decreased by 6.7% in Q4 and 6.5% for the year, with notable underperformance in the digital business.

The company announced the closure of 27 underperforming stores and one e-commerce fulfillment center, resulting in a one-time charge of $76 million. Inventory was up 2% compared to last year, driven by investments to rebuild proprietary brand inventory.

Cost Management: Kohl's has focused on reducing selling, general & administrative (SG&A) expenses. This discipline is expected to continue contributing to profitability.

Kohl's is committed to reducing costs and investing in future growth, with actions taken in Q4 resulting in lower spending in stores, marketing, and supply chain, showing a decrease in SG&A expenses by 4.5%.

Underpenetrated Categories: The company is making progress in categories like home decor, gifting, impulse purchases, and baby products, which could provide some cushion against overall sales declines.

Digital Sales: Digital sales have been a struggling area, with declines in previous quarters due to weakness in the home category and an online inventory suppression issue. Execution in e-commerce will be closely watched.

Digital sales underperformed with a comparable sales decline of 13.4% in Q4 and 8.7% for the year. The digital business faced headwinds from an inventory suppression issue, although improvements were seen after correction.

Kohl's (KSS) Price Target

Based on 13 analysts offering 12 month price targets for Kohl's in the last 3 months. The average price target is $6.80 with a high forecast of $9.00 and a low forecast of $4.00. The average price target represents a -9.03% change from the last price of $7.48.

For the full fiscal year 2025, Kohl's previously guided for net sales to decrease by 5% to 7% and comparable sales to decrease by 4% to 6%. Diluted EPS is expected to be in the range of $0.10 to $0.60.

Technical Analysis - Exponential Moving Average (EMA)

Analysts are expecting Kohl’s to report a loss for the EPS, and there are still considerable headwinds facing Kohl’s the previous announcement of the closure of 27 underperforming stores and one e-commerce fulfillment center, this has added to their cost as well as supply chain.

From the technicals, it has been on the negative momentum for a pretty long time, and it is currently trading below the 50-day key level, and with the impact of tariffs and also uncertainity coming from consumer spending.

Kohl’s might have a hard time to overcome this, but I will watch the earnings to see how it can present its future trajectory. The current share price is at a discount and with a strong balance sheet (with $1.2 billion in cash and manageable debt).

Summary

Despite the anticipated Q1 loss, some analysts suggest that Kohl's valuation (forward P/E of 15.92, which is a discount to its five-year average) and strong balance sheet (with $1.2 billion in cash and manageable debt) could present an "asymmetric upside" if fundamentals improve in the second half of the year.

I think as investors we might want to closely scrutinizing the actual Q1 2025 results and management's updated guidance during the 29 May earnings call for further insights into Kohl's performance and future trajectory.

Appreciate if you could share your thoughts in the comment section whether you think Kohl’s could provide better figure for digital sales and also significant cost management performance.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.