Kohl’s Corp.’s jump in earnings guidance and its holiday season same-store sales results indicate that the retailer has snapped up market share, according to Neil Saunders, managing director at GlobalData Retail.
Adjusted EPS is expected to be $3.98 to $4.08 compared with prior guidance of $3.60 to $3.80. The FactSet consensus is $3.82.
Same-store sales for the November-through-December period were up 6.9%.
Chief Executive Kevin Mansell said business was “consistently strong” through November and December, and “all lines of business, all regions reported positive same-store sales.” Strong traffic drove “positive” sales, he added.
Kohl’s will announce fourth-quarter and fiscal 2017 results on March 1, the company said. Kohl’s shares were up 5.1% in Monday trading, and closed the day up 4.7%.
“After good updates from both Macy’s and J.C. Penney, Kohl’s positive sales growth comes as no surprise,” wrote GlobalData’s Saunders in a note. “However, the extent of the increase is impressive and suggests that Kohl’s grew its market share over the holiday season.”
Last week, Macy’s Inc.
and J.C. Penney Co. Inc.
both reported same-store sales increases during the holiday shopping period. Victoria’s Secret L Brands Inc.
, however, issued a profit warning.
Saunders called Macy’s growth “relatively weak,” and said it was “far less than the overall sector,” which causes concern.
Kohl’s improvement is coming off of a prior year when same-store sales fell by 2.2% in the fourth quarter.
“Despite this, we believe that Kohl’s performance demonstrates that many of the initiatives undertaken over the past year are now paying off,” Saunders wrote.
Among the initiatives were an increase in athletic gear with the introduction of Under Armour Inc.
and additional Nike Inc.
and Adidas AG
gear, the launch of smaller-format stores, and a partnership with Amazon.com Inc.
that allows customers to return items purchased on Amazon at Kohl’s stores and makes Amazon smart home products available at Kohl’s.
“In our view, similar to other department store peers, Kohl’s strong holiday sales were a result of continued store and digital investments, improved traffic, better inventory management, and overall strong macroeconomic backdrop giving consumers confidence,” wrote Cowen analysts led by Oliver Chen. “Also we believe Kohl’s is a beneficiary of its off-mall physical store footprint which is more convenient for customers to visit.”
Both GlobalData and Cowen believe Kohl’s still has work to do to continue to improve performance. But the retailer will get some help from the new tax measures.
“[O]ur analysis indicates Kohl’s will be one of the biggest beneficiaries of tax reform in our coverage universe, which we believe management will consider partially reinvesting into store operations and labor, with the remainder increasing capital returns,” Cowen wrote.
Cowen rates Kohl’s shares market perform with a $47 price target.
Lululemon Athletica Inc.
shares are down 1.2% in Monday trading despite raising its fourth-quarter revenue guidance to a range of $905 million to $915 million compared with previous guidance in the range of $870 million to $885 million.
EPS is expected to be in the range of $1.24 to $1.26 for the quarter, up from a range of $1.18 to $1.21. And adjusted EPS is expected to be in the range of $1.25 to $1.27, up from a range of $1.19 to $1.22.
The FactSet consensus is for revenue of $886 million and EPS of $1.22.
CFRA Research analysts expect the athleisure segment to continue to grow globally.
“Lululemon and Nordstrom
will likely continue to expand their existing dominant share in the domestic segment as both companies invest in further omnichannel capabilities to drive customer traffic and conversion,” analysts wrote. “New category entrants such as Nike and Amazon are also expected to take share as both firms are currently investing in capabilities to roll out athleisure and yoga offerings in 2018. In international markets, we expect Nike and Lululemon to emerge as athleisure winners as both companies seem on track to post double-digit growth in their largest international segment – China.”
The revised guidance sent shares soaring 7.3% in Monday trading.
Kohl’s shares are up more than 32.4% for the last three months, and Lululemon shares are up 27.6% for the period. The SPDR S&P Retail ETF
is up 13.3% for the past three months, and the S&P 500 index
is up 8% for the period.