Kohl’s shares surge after earnings top estimates, retailer raises forecast as higher foot traffic drives sales

Shares of Kohl’s surged more than 8% on Thursday after the company reported fiscal second-quarter earnings that beat expectations and raised its forecast for the year, as shoppers headed back to its stores.

“Based on our results, we are raising our full year 2021 guidance, which positions us to achieve many of our 2023 strategic goals this year, well ahead of our plan,” said CEO Michelle Gass, in a press release.

Here’s how the company did for its second quarter ended July 31 compared with what analysts surveyed by Refinitiv were anticipating:

• Earnings per share: $2.48 vs. $1.21 expected
• Revenue: $4.45 billion vs. $4.02 billion expected

Net income rose to $382 million, or $2.48 per share, from $47 million, or 30 cents per share, a year earlier. The results topped the $1.21 per share expected by analysts surveyed by Refinitiv.

Revenue rose 31% to $4.45 billion, outpacing estimates of $4.02 billion.

Kohl’s expects full-year earnings per share to range from $5.80 to $6.10, up from $3.80 to $4.20.

During the quarter, Kohl’s repurchased $255 million of its stock. It said it plans to buy back $500 million to $700 million of its shares this year, up from $200 million to $300 million.

Kohl’s raised its net sales outlook for the year. It expects sales to grow at a low twenties percentage, up from the mid-to-high teens.

“Digital sales remain strong and increased 35% compared to the same period in 2019,” Gass said during the company’s conference call.

Digital sales represented 26% of total sales, lower than last year’s 41%, but higher than 20% it achieved in 2019, Gass said.

Kohl’s activewear continued to see strong demand with growth in both apparel and footwear. The company has put more of a focus on the category, which has been growing as shoppers seek out more casual and comfortable clothing during the pandemic.

“We have a goal to expand active and outdoor to 30% of our business. We continue to drive strong active sales growth and in Q2, it represented 24% of our sales, up from 20% in 2019,” she said.

As the industry experiences supply chain delays, Kohl’s said it’s experiencing some inventory shortages.

“Inventory was a little bit lighter than we expected at the end of the second quarter,” said Jill Timm, Kohl’s chief financial officer. “We didn’t make the progress back that we would have expected and that definitely is going to weigh a little bit from a sales perspective, so we’re aggressively going after that in the back half of the year.”

According to Gass, inventory delays have been more pronounced in its women’s business.

Earlier this month, the retailer opened up its first batch of Sephora locations in its stores to further its goal of boosting beauty sales.

In its earnings release, Gass said the company is on the eve of launching several more partnerships, but it didn’t provide further details during its earnings call.

Rival department store Macy’s also raised its outlook on Thursday, saying it was able to bring in new shoppers, ahead of the back-to-school season. Earlier this week, Walmart and Target reported quarterly sales that beat expectations.

The spread of the highly contagious delta variant has not yet shown much of an impact on retailers’ results even as some businesses reinstated mask mandates. The growth in Covid-19 cases has varied region by region, and is often worse in areas with low vaccination rates.

Shares of Kohl’s are up more than 27% year to date as of Wednesday’s market close, putting the retailer’s market value at $8.1 billion.