Kohl's Tumbles On Lower Profit And Guidance

Proving that Macy's third quarter success might not be replicated across all retailers, department store Kohl's released a disappointing earnings report Thursday morning, missing Street estimates on profit and revenue and lowering its fiscal year guidance. As a result, shares of Kohl's took an over-9%  tumble in pre-market trading.

Kohl's reported third quarter revenue of $4.4 billion, a 1% decline over this time last year and under Street consensus of $4.6 billion. Net income took an even bigger hit: the retailer saw an 18% drop, posting net income of $177 million compared to $215 million in the third quarter of 2012. This resulted in earnings of 81 cents per share, an 11% decline over last year's 91 cents per share and coming in well under analyst estimates of 86 cents per share.

As for the company's outlook, Kohl's said it expects earnings for the quarter ending February 1, 2014 to come in between $1.59 to $1.74 per diluted share. Kohl's said the guidance is based on total sales declines of 2 to 4% and comparable store sales declines of 0 to 2%. As for full-year fiscal 2013 outlook, Kohl's lowered its annual earnings guidance from a per-share range of $4.15 - $4.35 to a range of $4.08 to $4.23.

Kevin Mansell, Kohl's chairman, president and CEO did not account for his company's weak quarterly results in the report, saying only, "As we enter the holiday season, we believe we are well-positioned from a merchandise content and inventory perspective to gain market share. We have increased our marketing spending and improved its impact and reach in order to drive higher traffic to our stores and on-line."

In the company's earnings call, Mansell was more frank about the results. "Let’s be clear: we were disappointed in the third quarter results," he said. He noted that Kohl's e-commerce business only grew 15% for the quarter, which is lower than historical growth (it grew 28% in the second quarter of this year, for instance) but in line with the company's expectations given its online replatforming initiative.

"If we had not replatformed, we were not going to be able to reach our full potential online," Mansell said. "It’s not a fourth quarter initiative, its’ a next three years initiative that just went through. We knew it was going to hurt our online business."

On a brighter note, Mansell said that seasonal weather led to a very strong October, and that strength has continued into November. Mansell explained some of his holiday shopping optimism by noting that Kohl's customers see the store as a "Black Friday destination."

Kohl's also announced a quarterly cash dividend of 35 cents per share, payable on December 24, 2013.

Following the release of the earnings report, shares of Kohl's plummeted 9.5% in early pre-market trading but leveled off slightly closer to the market open; shares are poised to open roughly $4 lower than Wednesday's close. Meanwhile, fellow retailer competitors were mixed in pre-bell activity Thursday morning, with Macy's and JC Penney enjoying small upticks (0.4% and 0.5%, respectively), while Walmart and Target trading in the red (1.6% and 0.5%, respectively).