Kohl's Corporation (KSS), Mid/Small Cap AI Study of the Week

August 1, 2024

Weekly AI Study from the S&P 400 or S&P 600

Company Overview

Kohl's Corporation, established in 1988, operates 1,174 stores along with an e-commerce platform, offering a diverse range of moderately-priced private and national brand apparel, footwear, accessories, beauty, and home products. The company has exclusive agreements with recognized brands like Food Network and LC Lauren Conrad to develop private brands. To manage their supply chain, Kohl’s operates nine retail distribution centers and six e-fulfillment centers, ensuring efficient digital sales through shipping or in-store pick-up options. Emphasizing human capital, diversity, equity, and inclusion, Kohl's provides competitive compensation and benefits for its 96,000 associates.

Kohl's stays competitive in the retail industry by focusing on a balanced product mix, value, customer experience, and loyalty programs. The company faces competition from various retail formats, including online retailers, off-price retailers, warehouse clubs, mass merchandisers, specialty stores, and traditional department stores. Kohl’s sources merchandise from a wide range of domestic and international suppliers, adhering to strict compliance standards, and avoids over-reliance on any single vendor or geographical location. The business experiences seasonal fluctuations, with peak sales during back-to-school and holiday seasons. Kohl’s owns several important trademarks, including KOHL'S®, which are vital for their branding and overall business value. Investor-related information and governance documents are accessible on their corporate website, with options for shareholders to request paper copies.

By the Numbers

• Annual 2023 Net Sales: $16.6 billion, a 3.4% decline from the previous year.
• Annual 2023 Comparable Sales: Decreased by 4.7%.
• Annual 2023 Gross Margin: Increased to 36.7%.
• Annual 2023 SG&A Expenses: Reduced by 1.3% to $5.5 billion.
• Annual 2023 Operating Income: $717 million.
• Annual 2023 Net Income: $317 million, a recovery from the previous year's loss.
• Annual 2023 Inventory Levels: Reduced by 10%.
• Annual 2023 Operating Cash Flow: $1.2 billion, up from $282 million in 2022.
• Fiscal Year 2024 Net Sales Projection: Between -1% and +1%.
• Fiscal Year 2024 Comparable Sales Growth Projection: Between 0% and 2%.
• Fiscal Year 2024 Diluted EPS Projection: $2.10 to $2.70.
• Annual 2023 Distribution Expenses: Decreased to $406 million from $457 million in 2022.
• Annual 2023 Marketing Investments: Decreased.
• Fiscal Year 2024 SG&A Expense Projection: Expected to remain flat or slightly decrease.
• Annual 2023 Depreciation and Amortization: Declined due to reduced technology capital spending.
• Annual 2023 Net Interest Expenses: Increased due to borrowings and lease amendments.
• Fiscal Year 2024 Planned Investment: Approximately $500 million.
• Annual 2023 Credit Rating Outlook: Negative by Fitch, Moody’s, and S&P.
• Annual 2023 Interest Rate Increase: 50 basis points on specific notes, following a 75 basis point hike in 2022.
• Annual 2023 Financing Activities: Used $576 million, down from $933 million in 2022.
• Annual 2023 Revolving Credit Facility: $1.5 billion secured, with $92 million outstanding.
• Annual 2023 Adjusted Free Cash Flow: Improved to $519 million from a negative $639 million in 2022.

Q1 2024 Net Sales: $3.2 billion, a 5.3% decrease.

• Q1 2024 Comparable Sales: Down by 4.4%.
• Q1 2024 Gross Margin: Improved by 48 basis points to 39.5% of net sales.
• Q1 2024 SG&A Expenses: $1.2 billion, a slight decrease.
• Q1 2024 Net Loss: $27 million ($0.24 per diluted share), compared to a net income of $14 million ($0.13 per diluted share) in the prior year.
• Q1 2024 Inventory Levels: Decreased by 13% to $3.1 billion.
• Q1 2024 Operating Cash Flow: Use of $7 million, improved from a use of $202 million in Q1 2023.
• Q1 2024 Depreciation and Amortization: Stable at $188 million.
• Q1 2024 Net Interest Expense: Decreased due to a reduced balance on the revolving credit facility.
• Q1 2024 Cash and Cash Equivalents: Decreased to $228 million from $286 million.
• Q1 2024 Credit Rating: Downgraded by Fitch to BB+ with a stable outlook.
• Q1 2024 Financing Activities: Generated $178 million of cash, down from $429 million in Q1 2023.
• Q1 2024 Revolving Credit Facility: $355 million outstanding as of May 4, 2024, compared to $765 million as of April 29, 2023.
• Q1 2024 Dividends: Consistent cash dividend payments of $55 million.
• Q1 2024 Working Capital: $643 million.
• Q1 2024 Current Ratio: 1.21.