Kohl (KSS) is issuing long-term financial targets on Investor Day 2022

The Kohl’s logo appears on the outside of a Kohl’s store on January 24, 2022 in San Rafael, California.

Justin Sullivan | Getty Images

Kohl’s, in the face of pressure from activists to study a sale, wants investors to be aware of the progress it is making in terms of refreshing its brick stores and finding ways to attract new and younger buyers to the business.

“Make no mistake, this is a transformation,” CEO Michelle Gass said as she began a virtual investor meeting Monday morning. “It’s a complete reinvention of our business model and our brand.”

Ahead of Monday’s meeting, Kohl announced new long-term financial goals, including a one-percent increase in single-figure sales each year.

Kohl’s shares fell more than 8% in Monday afternoon trading as some investors were disappointed with the long-term outlook. Others expected the company to discuss a sales process in more detail.

Gordon Haskett analyst Don Bilson said he saw nothing in Kohl’s updated financial goals that would be a “knockout” for the trader. “The current margin guide is in line with the previous orientation, so this is not a game changer,” he said.

Kohl’s announced that it wants its Sephora business to grow to more than $ 2 billion in annual sales. Kohl’s has opened about 200 of its Sephora stores within its brick and mortar locations so far, and is on track to reach 850 next year. The company has not broken Sephora’s revenue into its profit and loss reports.

Meanwhile, Kohl’s is set to open more than 100 smaller format stores over the next four years with the goal of attracting new customers. Gas said in an interview that the smallest stores are about 35,000 square feet, on average, that they are testing one of the first in the Seattle area. For comparison, a typical Kohl’s store can hold about 80,000 square feet.

“This year is a big year for us,” he said over the phone. “The framework we have set for investors … is a very thoughtful guide for us.”

In addition to the long-term revenue target, Kohl’s said it will target annual operating margins of between 7% and 8%; a single-digit percentage increase in earnings per share; and a cash flow of more than $ 5.5 billion, approximately $ 2.5 billion between 2022 and 2024.

The key to Kohl’s transformation is to train customers to think about the company as opposed to shopping malls full of women’s clothing and household goods. Instead, the company said it wants to recognize it as a major destination for sportswear, including brands such as sneakers, hoodies and leggings, Nike, Adidas, Champion and its FLX label.

“We are evolving our position from a large store to a more focused lifestyle concept, focusing on an active and informal lifestyle,” Gas said at the investor meeting. “This is unique and we can own this space.”

Entrepreneurs drive change

Monday’s meeting with investors and analysts is in the spotlight as the trader is stepping up pressure from activist groups, one of whom wants to take control of the trader’s board.

Last month, Kohl dismissed the takeover bids on the table, saying he was underestimating his business. In recent weeks, however, Kohl’s has said it is working with bankers and other financial advisors to examine unsolicited offers and make proactive disclosures to potential buyers.

Macellum Advisors and Engine Capital activists have argued that Kohl’s has reduced the profits of other out-of-market retailers, such as Target and TJ Maxx, as well as some large chain stores including Macy’s. Kohl’s shares have risen about 6% in the last 12 months, compared to Macy’s shares, which is about 65%. The company has also asked Kohl to consider selling some of its properties and renting out the lease to unlock the capital.

On Friday, Macellum said Kohl, who recently released fourth-quarter fiscal results, was disappointed, saying he remained skeptical of the trader’s future, given his current board of directors and management setup.

“Why did sales hinder supply chain issues compared to other retailers’ peers?” asked Macellum managing partner Jonathan Duskin.

In the three-month period ended Jan. 29, Kohl reported $ 6.2 trillion in revenue, which was a bit far from analysts ’estimates, but provided a better revenue forecast for 2022 despite supply chain hurdles. The retailer also said it plans to double its annual dividend and buy at least $ 1 billion from its shares this year.

Everything is active

On Monday, Kohl’s underlined its intention to continue to grow its range of active goods, which it said were about 24% of revenue in 2021 compared to 14% in 2016.

According to Gassen, the Covid-19 pandemic sparked a desire for people to dress more comfortably among consumers, and there is a tendency for people to stay away from offices and other social settings while they return.

“I think we can all relate personally to this … Although you can dress up a little more than when you were taking a Zoom call from your home office, you might want to wear slippers rather than dress shoes in the office,” the CEO said at the investor meeting. “This creates great opportunities for Kohl’s.”

However, Kohl’s said it also expects the women’s clothing business to grow significantly as it expands its outdoor and swimming clothing and expands its inclusive sizes.

Commerce CEO Doug Howe explained that last year supply chain barriers had a disproportionate impact on the company’s range of women. This year, with the aim of sparking interest in women’s clothing and other non-active clothing, Kohl’s said it will try on “dress destinations” in some stores.

To make the out-of-store shopping experience easier for customers, Kohl’s also said that this year it will expand its in-store self-service shopping line at all locations while continuing to test self-service refunds and check-out offers.

In the long run, Kohl’s expects its digital business to generate $ 8 billion in annual revenue, thanks in part to its efforts to make it easier for visitors to brand and shop on its website. Kohl’s fiscal revenue for 2021 was $ 19.4 billion, up from $ 16 billion.

“We have proven that we have a very strong growth agent agenda, that we will have a long back wind ahead of us, and that gives us confidence,” Gas said.

Find Kohl’s full press release here.

Kohl (KSS) is issuing long-term financial targets on Investor Day 2022

Source link Kohl (KSS) is issuing long-term financial targets on Investor Day 2022

Back to top button