Kohl's Sticks To FY23 Outlook Post Q2 Earnings Beat; Inventory Declines 14%

Kohl's Corp KSS reported a second-quarter FY23 revenue decline of 4.8% year-on-year to $3.90 billion, beating the analyst consensus of $3.69 billion. Comparable sales decreased 5%.

Gross margin for the quarter contracted by 61 basis points to 39%. Operating income for the quarter was $163 million versus $266 million last year. The operating margin compressed 233 basis points to 4.2%.

Selling, general and administrative expenses increased 1.6% Y/Y to $1.3 billion.

EPS of $0.52 beat the consensus estimate of $0.22.

Inventory at the end of Q2 was $3.5 billion, a 14% decrease Y/Y.

Kohl's held $204 million in cash and equivalents as of July 29, 2023. Operating cash flow was $430 million in the quarter.

On August 8, 2023, Kohl's Board declared a quarterly cash dividend of $0.50 per share, payable September 20, 2022, to shareholders of record on September 6, 2023.

Outlook: Kohl's reaffirmed FY23 sales decline of 2% - 4%. It expects FY23 EPS, excluding any non-recurring charges, of $2.10 - $2.70 versus the Street view of $2.38.

KSS expects an FY23 operating margin of 4% and capital expenditures of $600 million-$650 million, including expansion of its Sephora partnership and store refresh activity.

Price Action: KSS shares are trading lower by 0.51% at $25.60 on the last check Wednesday.

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