Kohl's Reports Fourth Quarter and Full Year Fiscal 2022 Financial Results

• Fourth quarter net sales decrease 7.2% and comparable sales decrease 6.6%
• Fourth quarter diluted loss per share of ($2.49)
• Introduces full year 2023 financial outlook
• Committed to strengthening balance sheet, while continuing to return capital to shareholders through the dividend in 2023

Kohl’s Corporation (NYSE:KSS) today reported results for the quarter and year ended January 28, 2023.

Tom Kingsbury, Kohl’s chief executive officer, stated, “Kohl’s fourth quarter results reflect meaningful proactive measures we took to better position the business for 2023, as well as sales pressure driven by the ongoing persistent inflationary environment. Kohl’s has a solid foundation and a highly motivated team with a set of priorities to capitalize on what I see as a substantial opportunity to make a difference in the retail landscape.”

Mr. Kingsbury continued, “Our efforts to drive the business are already underway. We are refining our strategy and re-establishing merchandise disciplines with a customer-centric focus across the organization. I am confident that our efforts will drive improved, and more consistent, sales and earnings performance over the long-term.”

Fourth Quarter 2022 Results

Comparisons refer to the 13-week period ended January 28, 2023 versus the 13-week period ended January 29, 2022

• Net sales decreased 7.2% year-over-year, to $5.8 billion, with comparable sales down 6.6%.
• Gross margin as a percentage of net sales was 23.0%, a decrease of 1,016 basis points. Clearance markdowns impacted margin by approximately 750 basis points and product cost inflation impacted margin by approximately 200 bps.
• Selling, general & administrative (SG&A) expenses decreased 0.6% year-over-year, to $1.7 billion. As a percentage of total revenue, SG&A expenses were 27.9%, an increase of 190 basis points year-over-year.
• Operating loss was $302 million compared to operating income of $450 million in the prior year. As a percentage of total revenue, operating loss was 5.0%, a decrease of 1,195 basis points year-over-year.
• Net loss was $273 million, or ($2.49) per diluted share. This compares to net income of $299 million, or $2.20 per diluted share in the prior year.
• Inventory was $3.2 billion, an increase of 4% year-over-year.
• Operating cash flow was $707 million driven by improvements in working capital during the fourth quarter of 2022.

Fiscal Year 2022 Results

Comparisons refer to the 52-week period ended January 28, 2023 versus the 52-week period ended January 29, 2022

• Net sales decreased 7.1% year-over-year, to $17.2 billion, with comparable sales down 6.6%.
• Gross margin as a percentage of net sales was 33.2%, a decrease of 485 basis points.
• SG&A expenses increased 2.0% year-over-year, to $5.6 billion. As a percentage of total revenue, SG&A expense was 30.9%, an increase of 268 basis points year-over-year.
• Operating income was $246 million compared to $1.7 billion in the prior year. As a percentage of total revenue, operating income was 1.4%, a decrease of 729 basis points year-over-year.
• Net loss of $19 million, or ($0.15) per diluted share. This compares to net income of $938 million, or $6.32 per diluted share, and adjusted net income of $1.1 billion, or $7.33 per diluted share, in the prior year.
• Operating cash flow was $282 million.

2023 Financial and Capital Allocation Outlook

For the full year 2023, the Company currently expects the following:

• Net sales: A decrease of (2%) to (4%), includes the impact of the 53rd week which is worth approximately 1% year-over-year.
• Operating margin: Approximately 4.0%.
• Diluted earnings per share: In the range of $2.10 to $2.70, excluding any non-recurring charges.
• Capital Expenditures: $600 million to $650 million, including expansion of its Sephora partnership and store refresh activity.
• Dividend: On February 21, 2023, 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 March 29, 2023 to shareholders of record at the close of business on March 15, 2023.
• Debt Reduction: The Company retired $164 million of bonds that matured in February 2023, and expects to retire $111 million of bonds maturing in December 2023.

Fourth Quarter 2022 Earnings Conference Call

Kohl’s will host its quarterly earnings conference call at 9:00 am ET on March 1, 2023. 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 (loss) income and adjusted diluted (loss) 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 (loss) income and adjusted diluted (loss) 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.

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