MENOMONEE FALLS, Wisconsin
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August 19, 2022
(press release)
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Kohl’s Corporation (NYSE:KSS) today reported results for the quarter ended July 30, 2022. Three Months Six Months ($ in millions, except per share data) July 30, 2022 July 31, 2021 Change July 30, 2022 July 31, 2021 Change Total revenue $ 4,087 $ 4,447 (8.1 %) $ 7,802 $ 8,334 (6.4 %) Net sales(1) (8.5 %) 31.4 % (7.0 %) 46.8 % Gross margin 39.6 % 42.5 % (290) bps 39.0 % 40.9 % (189) bps Selling, general, and administrative expenses $ 1,283 $ 1,241 3.4 % $ 2,576 $ 2,411 6.8 % Reported Net income $ 143 $ 382 (63 %) $ 157 $ 396 (60 %) Diluted earnings per share $ 1.11 $ 2.48 (55 %) $ 1.22 $ 2.55 (52 %) Non-GAAP(2) Adjusted net income $ 143 $ 382 (63 %) $ 157 $ 547 (71 %) Adjusted diluted earnings per share $ 1.11 $ 2.48 (55 %) $ 1.22 $ 3.52 (65 %) (1) Represents change in Net sales vs. prior year period. (2) Amounts shown for the three and six months ended July 30, 2022 and the three months ended July 31, 2021 are GAAP as there are no adjustments to Non-GAAP. These amounts are shown for comparability purposes. “Second quarter results were impacted by a weakening macro environment, high inflation and dampened consumer spending, which especially pressured our middle-income customers. We have adjusted our plans, implementing actions to reduce inventory and lower expenses to account for a softer demand outlook. Kohl’s has navigated difficult periods in the past and I am confident in our ability to successfully manage through the current uncertainty. I want to thank our incredible associates around the country for their commitment to Kohl’s and for providing excellent service to our customers every day. We continue to execute on our transformation strategy and are pleased to deliver outsized performance in the nearly 600 stores which have been refreshed and elevated, featuring Sephora as a key cornerstone,” said Michelle Gass, Kohl’s chief executive officer. “While 2022 has turned out to be more challenging than initially expected, Kohl’s remains a financially strong company with significant long-term growth potential. Our $500 million accelerated share repurchase underscores our steadfast confidence in Kohl’s future and focus on creating shareholder value. We also remain firmly committed to our current dividend,” said Gass. Updated 2022 Financial Outlook The Company is updating its full year 2022 financial outlook to include the following: Accelerated Share Repurchase Agreement On August 18, 2022, the Company entered into an accelerated share repurchase agreement (ASR), pursuant to its previously announced share repurchase program, to repurchase approximately $500 million of the Company’s common stock. Dividend As previously announced, on August 9, 2022, Kohl’s Board of Directors declared a quarterly cash dividend on the Company’s common stock of $0.50 per share. The dividend is payable September 21, 2022 to shareholders of record at the close of business on September 7, 2022. Second Quarter 2022 Earnings Conference Call Kohl’s will host its quarterly earnings conference call at 9:00 am ET on August 18, 2022. A webcast of the conference call and the related presentation materials will be available via the Company's web site at investors.kohls.com, both live and after the call. Cautionary Statement Regarding Forward-Looking Information and Non-GAAP Measures This press release 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 Item 1A of Part II of the Company’s Quarterly Report on Form 10-Q for the first quarter of fiscal 2022, 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 income and adjusted diluted 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 income and adjusted diluted 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 and the online convenience of Kohls.com and the Kohl's App, Kohl's offers amazing national and exclusive brands at incredible savings for families nationwide. Kohl’s is uniquely positioned to deliver against its strategy and its vision to be the most trusted retailer of choice for the active and casual lifestyle. Kohl’s is committed to progress in its diversity and inclusion pledges, and the company's environmental, social and corporate governance (ESG) stewardship. 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) July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021 Net sales $ 3,863 $ 4,223 $ 7,334 $ 7,885 Other revenue 224 224 468 449 Total revenue 4,087 4,447 7,802 8,334 Cost of merchandise sold 2,332 2,426 4,472 4,659 Gross margin rate 39.6 % 42.5 % 39.0 % 40.9 % Operating expenses: Selling, general, and administrative 1,283 1,241 2,576 2,411 As a percent of total revenue 31.4 % 27.9 % 33.0 % 28.9 % Depreciation and amortization 206 210 406 421 Operating income 266 570 348 843 Interest expense, net 77 62 145 129 Loss on extinguishment of debt — — — 201 Income before income taxes 189 508 203 513 Provision for income taxes 46 126 46 117 Net income $ 143 $ 382 $ 157 $ 396 Average number of shares: Basic 127 152 127 153 Diluted 128 154 129 155 Earnings per share: Basic $ 1.13 $ 2.51 $ 1.24 $ 2.58 Diluted $ 1.11 $ 2.48 $ 1.22 $ 2.55 ADJUSTED NET INCOME AND DILUTED EARNINGS PER SHARE, NON-GAAP FINANCIAL MEASURES (Unaudited) Three Months Ended Six Months Ended (Dollars in Millions, Except per Share Data) July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021 Net income GAAP $ 143 $ 382 $ 157 $ 396 Loss on extinguishment of debt — — — 201 Income tax impact of items noted above — — — (50) Adjusted (non-GAAP) $ 143 $ 382 $ 157 $ 547 Diluted earnings per share GAAP $ 1.11 $ 2.48 $ 1.22 $ 2.55 Loss on extinguishment of debt — — — 1.29 Income tax impact of items noted above — — — (0.32) Adjusted (non-GAAP)(1) $ 1.11 $ 2.48 $ 1.22 $ 3.52 (1) Amounts shown for the three and six months ended July 30, 2022 and the three months ended July 31, 2021 are GAAP as there are no adjustments to Non-GAAP. These amounts are shown for comparability purposes. KOHL’S CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in Millions) July 30, 2022 July 31, 2021 Assets Current assets: Cash and cash equivalents $ 222 $ 2,569 Merchandise inventories 4,034 2,733 Other 374 356 Total current assets 4,630 5,658 Property and equipment, net 8,228 7,107 Operating leases 2,296 2,301 Other assets 469 440 Total assets $ 15,623 $ 15,506 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 1,497 $ 1,495 Accrued liabilities 1,426 1,554 Borrowings under revolving credit facility 79 — Current portion of: Long-term debt 164 — Finance leases and financing obligations 96 117 Operating leases 108 143 Total current liabilities 3,370 3,309 Long-term debt 1,747 1,909 Finance leases and financing obligations 2,830 1,906 Operating leases 2,568 2,532 Deferred income taxes 194 245 Other long-term liabilities 370 386 Shareholders' equity 4,544 5,219 Total liabilities and shareholders' equity $ 15,623 $ 15,506 KOHL’S CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended (Dollars in Millions) July 30, 2022 July 31, 2021 Operating activities Net income $ 157 $ 396 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 406 421 Share-based compensation 26 25 Deferred income taxes (12 ) (57 ) Loss on extinguishment of debt — 201 Non-cash lease expense 56 74 Other non-cash expenses 5 9 Changes in operating assets and liabilities: Merchandise inventories (964) (138) Other current and long-term assets (29) 590 Accounts payable (185) 19 Accrued and other long-term liabilities 51 228 Operating lease liabilities (57 ) (76 ) Net cash (used in) provided by operating activities (546) 1,692 Investing activities Acquisition of property and equipment (548 ) (191 ) Proceeds from sale of real estate 4 4 Net cash used in investing activities (544 ) (187 ) Financing activities Proceeds from issuance of debt — 500 Net borrowings under revolving credit facility 79 — Deferred financing costs — (5 ) Treasury stock purchases (158 ) (301 ) Shares withheld for taxes on vested restricted shares (20 ) (25 ) Dividends paid (127 ) (77 ) Reduction of long-term borrowings — (1,044 ) Premium paid on redemption of debt — (192 ) Finance lease and financing obligation payments (55 ) (65 ) Proceeds from financing obligations 5 4 Proceeds from stock option exercises 1 1 Other — (3) Net cash used in financing activities (275) (1,207) Net (decrease) increase in cash and cash equivalents (1,365) 298 Cash and cash equivalents at beginning of period 1,587 2,271 Cash and cash equivalents at end of period $ 222 $ 2,569
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