Kohl's (NYSE: KSS) stock fell almost 20% following an earnings report that did not live up to expectations and a lowering of expectations for the following year. As the holiday season kicks into full swing across the nation, a large question following retailers is whether they will be able to stem the bleeding from the massive shift from brick and mortar retail stores to online shopping. Kohl's has specialized in discount fashion and home goods and is trying to optimize its real estate and enhance its online shopping to adapt to the rapidly changing retail climate. Despite this, the bankruptcy of companies like Sears (OTC: SHLDQ) and the decline of Americans' overall desire to shop at retail stores puts Kohl's at risk.
Kohl's came in well under its expectations in its earnings report for the third quarter of 2019. While analysts had expected Kohl's to post earnings of 85 cents a share, the retailer missed that expectation by 7 cents, posting earnings of 78 cents a share. Revenue was expected to be at $4.66 billion but the posted revenue was slightly below this at $4.63 billion a share. Same-store sales growth, one of the most important metrics for a retailer, was also less than expected. While the consensus expectation of Kohl's was that it would post a 0.8% growth in existing store sales, it was only able to accomplish half that, coming in with a same-store sales growth of just 0.4%.
Another alarming metric that came out of this most recent earnings report is the lowered expectations for full year earnings per share. Its full year EPS target was somewhere around $5.25 before this recent earnings report; now, it is at $4.85 per share. Considering the importance of the Q4 holiday shopping season for retailers, this may be evidence that Kohl's expects a less than stellar lead up to Christmas. The uncertainty surrounding the retail environment has Kohl's looking for new ways to improve profitability, but whether those new ways will materialize is still to be answered.