Kohl's Shares Drop As Inflation Affects Q2 Earnings; Cuts FY22 Outlook Sharply

Kohl's Corp KSS reported a second-quarter FY22 revenue decline of 8.1% year-on-year to $4.09 billion, beating the consensus of $3.85 billion.
Gross margin for the quarter contracted by 290 basis points to 39.6%. The operating margin was 6.5%, and operating income for the quarter fell 53.3% Y/Y to $266 million.
Selling, general and administrative expenses increased 3.4% Y/Y to $1.3 billion.
Adjusted EPS of $1.11 missed the consensus of $1.14.
Kohl's held $222 million in cash and equivalents as of July 30, 2022. Cash used by operating activities for six months totaled $(546) million versus cash provided of $1.7 billion a year ago.
The company entered into an accelerated share repurchase agreement (ASR) to repurchase approximately $500 million of common stock.
"Second quarter results were impacted by a weakening macro environment, high inflation, and dampened consumer spending, which especially pressured our middle-income customers," said CEO Michelle Gass.
The company's Board recently declared a quarterly cash dividend of $0.50 per share, payable September 21, 2022, to shareholders of record on September 7, 2022.
Outlook: Kohl's sees FY22 EPS of $2.80 - $3.20 (prior view $6.45 - $6.85) versus the estimate of $4.06.
The company expects an FY22 sales decline of 5% - 6% (prior view 0% - 1% growth) versus last year.
The operating margin for FY22 is expected to be 4.2% - 4.5% (prior view 7.0% - 7.2%).
Price Action: KSS shares are trading lower by 8.69% at $31.00 on the last check Thursday.
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