What Caused a 51% Drop in Kohl’s 1Q16 Earnings?
What Caused a 51% Drop in Kohl’s 1Q16 Earnings?
Poor 1Q16 earnings
Kohl’s (KSS) disappointed its investors with a significant drop in its 1Q16 earnings. The mid-scale department store reported adjusted EPS (earnings per share) of $0.31 in 1Q16 ended April 30, 2016, missing the consensus Wall Street analyst estimate of $0.37. The company’s adjusted EPS declined by 50.8% in 1Q16 compared to the first quarter of the previous fiscal year.
Headwinds in 1Q16
Kohl’s earnings in 1Q16 were adversely impacted by lower sales amid a challenging retail environment. We’ll discuss the factors that dragged down the company’s sales in part three of this series. The bottom line in 1Q16 was also impacted by the higher markdowns that the company took to clear excess merchandise.
Kohl’s performance in 1Q16 deteriorated when compared sequentially to the fourth quarter of fiscal 2015 and on a year-over-year basis compared to the first quarter of fiscal 2015. Kohl’s 50.8% decline in its 1Q16 adjusted EPS was higher than the 13.7% decline in its adjusted EPS in 4Q15. The company’s adjusted EPS grew 5% in 1Q15.
Peers down in 1Q16
Macy’s (M) reported a 28.6% decline in its 1Q16 adjusted EPS due to lower sales and pressure on margins. Nordstrom (JWN) reported a 45.5% decline in its adjusted EPS in 1Q16. The company cited lower-than-planned sales and higher markdowns as the reasons for the decline in earnings. Lower sales and markdowns also impacted the results of Dillard’s (DDS), which posted an 18.6% drop in its adjusted EPS in 1Q16.
Kohl’s, Macy’s, Nordstrom, and Dillard’s account for 3.7% of the SPDR S&P Retail ETF (XRT). The XRT ETF invests 5.5% of its holdings in the department store sector. As of May 12, the XRT ETF has declined by 3.2% on a year-to-date basis.
We’ll discuss the sales performance of Kohl’s in 1Q16 in the next part of this series.
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