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Kohl’s Corporation Reports Financial Results image

Kohl’s Corporation Reports Financial Results

  • strengthened financial position during the quarter, ending with $2.4 billion in cash
  • Disciplined management of expenses and inventory resulted in positive operating cash flow
  • Second quarter net sales decrease (22.9%)
  • Second quarter diluted earnings per share of $0.30; adjusted loss per share(2) of ($0.25)

Menomonee Falls, WI — Kohl’s Corporation reported results for the quarter ended August 1, 2020.

  Three Months Six Months
($ in millions, except per share data) August 1,
2020
August 3,
2019
Change August 1,
2020
August 3,
2019
Change
Total revenue $ 3,407   $ 4,430     (23.1 )% $ 5,835   $ 8,517     (31.5 )%
Net sales(1)   (22.9 )%   (3.3 )%         (32.8 )%   (3.3 )%      
Gross margin   33.1 %   38.8 % (569) bps     26.8 %   37.9 % (1,109) bps  
Selling, general, and administrative expenses $ 1,050   $ 1,269     (17.3 )% $ 2,116   $ 2,544     (16.8 )%
Reported                                    
Net income (loss) $ 47   $ 241     (80 )% $ (494 ) $ 303     (263 )%
Diluted earnings (loss) per share $ 0.30   $ 1.51     (80 )% $ (3.21 ) $ 1.89     (270 )%
Non-GAAP(2)                                    
Adjusted net (loss) income $ (39 ) $ 247     (116 )% $ (534 ) $ 345     (255 )%
Adjusted diluted (loss) earnings per share $ (0.25 ) $ 1.55     (116 )% $ (3.47 ) $ 2.15     (261 )%

(1) Represents change in Net sales vs. prior year period. We are not reporting comparable sales due to store closures.
(2) Excludes Impairments, store closing, and other costs and Gain on sale of real estate.

“Our organization continues to navigate through a period of extraordinary change and uncertainty presented by the COVID-19 crisis. During the second quarter we made significant progress in rebuilding our business. We reopened all of our stores with new safety and operating procedures, accelerated digital growth, and showed great discipline in managing inventory and expenses meaningfully lower. In doing so, we generated positive operating cash flow and further enhanced our financial position,” said Michelle Gass, Kohl’s chief executive officer.

“As we look ahead, we are planning for the crisis to continue to impact our business in the near-term,” said Gass. “We are well-positioned to capitalize on evolving customer behaviors and the retail industry disruption, which we believe will drive long-term growth and increased market share.”

Second Quarter 2020 Earnings Conference Call
Kohl’s will host its quarterly earnings conference call at 9:00 am ET on August 18, 2020. A webcast of the conference call and the related presentation materials will be available via the Company’s web site at http://corporate.kohls.com/investors/events-and-presentations, both live and after the call.

Cautionary Statement Regarding Forward-Looking Information and Non-GAAP Measures
This current report on Form 8-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Company intends forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “anticipates,” “plans,” or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause the Company’s actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, risks described more fully in Item 1A in the Company’s Annual Report on Form 10-K, and in Item 1A of Part II in the Company’s Quarterly Report on Form 10-Q for the quarter ended May 2, 2020, which are expressly incorporated herein by reference, and other factors as may periodically be described in the Company’s filings with the SEC. Forward-looking statements relate to the date initially made, and Kohl’s undertakes no obligation to update them.

In this press release, the Company provides information regarding adjusted net (loss) income and adjusted diluted (loss) earnings per share, which are not recognized terms under U.S. generally accepted accounting principles (“GAAP”) and do not purport to be alternatives to net income as a measure of operating performance. A reconciliation of adjusted net (loss) income and adjusted diluted (loss) earnings per share is provided in this release. The Company believes that the use of these non-GAAP financial measures provides investors with enhanced visibility into its results with respect to the impact of certain costs. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies.

About Kohl’s
Kohl’s (NYSE: KSS) is a leading omnichannel retailer with more than 1,100 stores in 49 states. With a commitment to inspiring and empowering families to lead fulfilled lives, Kohl’s offers amazing​​ national and exclusive brands, incredible savings and an easy shopping experience in our stores, online at Kohls.com and on Kohl’s mobile app. ​Since its founding, Kohl’s has given more than $750 million to support communities nationwide, with a focus on family health and wellness. For a list of store locations or to shop online, visit Kohls.com. For more information about Kohl’s impact in the community or how to join our winning team, visit Corporate.Kohls.com or follow @KohlsNews on Twitter.

KOHL’S CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
  Three Months Ended Six Months Ended
(Dollars in Millions, Except per Share Data) August 1,
2020
August 3,
2019
August 1,
2020
August 3,
2019
Net sales $ 3,213   $ 4,169   $ 5,373   $ 7,990  
Other revenue   194     261     462     527  
Total revenue   3,407     4,430     5,835     8,517  
Cost of merchandise sold   2,149     2,550     3,936     4,965  
Gross margin rate   33.1 %   38.8 %   26.8 %   37.9 %
Operating expenses:                        
Selling, general, and administrative   1,050     1,269     2,116     2,544  
As a percent of total revenue   30.8 %   28.6 %   36.3 %   29.9 %
Depreciation and amortization   219     228     446     458  
Impairments, store closing, and other   (2 )   7     64     56  
(Gain) on sale of real estate   (127 )       (127 )    
Operating income (loss)   118     376     (600 )   494  
Interest expense, net   78     53     136     105  
Income (loss) before income taxes   40     323     (736 )   389  
(Benefit) provision for income taxes   (7 )   82     (242 )   86  
Net income (loss) $ 47   $ 241   $ (494 ) $ 303  
Average number of shares:                        
Basic   154     159     154     160  
Diluted   155     159     154     161  
Earnings (loss) per share:                        
Basic $ 0.31   $ 1.52   $ (3.21 ) $ 1.90  
Diluted $ 0.30   $ 1.51   $ (3.21 ) $ 1.89  
ADJUSTED NET (LOSS) INCOME AND DILUTED (LOSS) EARNINGS PER SHARE, NON-GAAP FINANCIAL MEASURES
(Unaudited)
  Three Months Ended Six Months Ended
(Dollars in Millions, Except per Share Data) August 1,
2020
August 3,
2019
August 1,
2020
August 3,
2019
Net income (loss)                        
GAAP $ 47   $ 241   $ (494 ) $ 303  
Impairments, store closing, and other   (2 )   7     64     56  
(Gain) on sale of real estate   (127 )       (127 )    
Income tax impact of items noted above   43     (1)     23     (14)  
Adjusted (non-GAAP) $ (39 ) $ 247   $ (534 ) $ 345  
Diluted (loss) earnings per share                        
GAAP(1) $ 0.30   $ 1.51   $ (3.21 ) $ 1.89  
Impairments, store closing, and other   (0.01 )   0.05     0.41     0.35  
(Gain) on sale of real estate   (0.82 )       (0.82 )    
Income tax impact of items noted above   0.28     (0.01)     0.15     (0.09)  
Adjusted (non-GAAP)(2) $ (0.25 ) $ 1.55   $ (3.47 ) $ 2.15  

(1) Weighted average diluted shares outstanding for purpose of calculating diluted earnings per share for the three months ended August 1, 2020 was 155 million, which includes the dilutive effect of share-based awards as determined under the treasury stock method.
(2) Weighted average diluted shares outstanding for purposes of calculating diluted adjusted (loss) earnings per share for the three months ended August 1, 2020 was 154 million as the effect of including dilutive shares would be antidilutive.

KOHL’S CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Millions) August 1,
2020
August 3,
2019
Assets            
Current assets:            
Cash and cash equivalents $ 2,428   $ 625  
Merchandise inventories   2,698     3,656  
Income tax receivable   205     16  
Other   357     381  
Total current assets   5,688     4,678  
Property and equipment, net   6,970     7,276  
Operating leases   2,418     2,428  
Other assets   159     160  
Total assets $ 15,235   $ 14,542  
Liabilities and Shareholders’ Equity            
Current liabilities:            
Accounts payable $ 1,064   $ 1,330  
Accrued liabilities   1,130     1,199  
Income taxes payable   86     34  
Current portion of:            
Finance leases and financing obligations   126     119  
Operating leases   160     158  
Total current liabilities   2,566     2,840  
Long-term debt   3,450     1,855  
Finance leases and financing obligations   1,356     1,270  
Operating leases   2,637     2,647  
Deferred income taxes   122     254  
Other long-term liabilities   267     221  
Shareholders’ equity   4,837     5,455  
Total liabilities and shareholders’ equity $ 15,235   $ 14,542  
KOHL’S CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Six Months Ended
(Dollars in Millions) August 1,
2020
August 3,
2019
Operating activities            
Net (loss) income $ (494 ) $ 303  
Adjustments to reconcile net (loss) income to net cash provided by operating activities:            
Depreciation and amortization   446     458  
Share-based compensation   14     27  
Deferred income taxes   (132 )   41  
Impairments, store closing, and other costs   48     45  
(Gain) on sale of real estate   (127 )    
Non-cash inventory costs   187      
Non-cash lease expense   74     75  
Other non-cash expenses   10     3  
Changes in operating assets and liabilities:            
Merchandise inventories   656     (175 )
Other current and long-term assets   20     29  
Accounts payable   (142 )   143  
Accrued and other long-term liabilities   (23 )   (177 )
Income taxes   (151 )   (8 )
Operating lease liabilities   (82 )   (88 )
Net cash provided by operating activities   304     676  
Investing activities            
Acquisition of property and equipment   (196 )   (439 )
Proceeds from sale of real estate   193      
Net cash used in investing activities   (3 )   (439 )
Financing activities            
Proceeds from issuance of debt   2,097      
Deferred financing costs   (19 )    
Treasury (TSRMF) stock purchases   (8 )   (254 )
Shares withheld for taxes on vested restricted shares   (20 )   (27 )
Dividends paid   (108 )   (214 )
Reduction of long-term borrowings   (497 )   (6 )
Finance lease and financing obligation payments   (44 )   (60 )
Proceeds from stock option exercises       2  
Proceeds from financing obligations   3     13  
Net cash provided by (used in) financing activities   1,404     (546 )
Net increase (decrease) in cash and cash equivalents   1,705     (309 )
Cash and cash equivalents at beginning of period   723     934  
Cash and cash equivalents at end of period $ 2,428   $ 625  

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