Kohl’s(US:KSS)2025-12-03 21:10Financial Performance - Net sales decreased by 2.8% to $3.4 billion in the third quarter, with comparable sales down 1.7%[62] - Gross margin as a percentage of net sales increased by 51 basis points to 39.6%[62] - Selling, general, and administrative (SG&A) expenses decreased by 2.1% to $1.3 billion, representing 35.3% of total revenue, an increase of 55 basis points year-over-year[62] - Operating income was $73 million, a decrease from $98 million in the prior year, with an operating income margin of 2.1%[62] - Net income was $8 million, or $0.07 per diluted share, compared to $22 million, or $0.20 per diluted share, in the prior year[62] - Other revenue decreased by $35 million in the third quarter and $63 million year to date, primarily due to lower sales to Kohl's credit card customers[72] Cash Flow and Inventory - Inventory decreased by 5% year-over-year to $3.9 billion, while cash flow from operating activities was $124 million[66] - Operating cash flow increased to $630 million year to date 2025, up from $52 million in the same period of 2024, driven by improved inventory management and higher net income[94] Future Projections - For the full year 2025, the company expects net sales to decrease by 3.5% to 4% and adjusted diluted earnings per share in the range of $1.25 to $1.45[67] - Capital expenditures are projected to be approximately $400 million, with a quarterly cash dividend of $0.125 per share declared[67] - Capital expenditures are projected to be approximately $400 million in 2025, focusing on the rollout of Sephora shops and expansion of E-commerce Fulfillment Centers[90] Impairments and Legal Settlements - The company recognized $4 million in impairments and other costs in Q3 2025, totaling $15 million year to date, including $11 million in non-cash charges related to asset impairments[79] - A gain of $129 million was recorded from a legal settlement regarding a credit card interchange fee lawsuit, significantly impacting net income[80] Debt and Credit Ratings - The corporate credit rating was downgraded from BB- to B+ by S&P, with a negative outlook, impacting borrowing costs[99] - The company issued $360 million in senior secured notes with a 10.000% interest rate due in 2030[108] - The company plans to repay $353 million of its 4.25% notes due in July 2025 at maturity[108] Compliance and Financial Position - The current ratio improved to 1.30 as of November 1, 2025, compared to 1.05 the previous year, driven by debt repayments and reduced borrowings[105][106] - The company is in compliance with all covenants related to its senior secured revolving credit facility as of November 1, 2025[107] Other Financial Information - As of November 1, 2025, cash and cash equivalents decreased to $144 million from $174 million year over year, with short-term investments of $8 million[91] - There have been no significant changes in contractual obligations as disclosed in the 2024 Form 10-K[108] - The company has not provided any financial guarantees from arrangements with unconsolidated entities as of November 1, 2025[109] - No special-purpose or off-balance sheet entities have been created for raising capital or incurring debt[110] - There have been no significant changes in critical accounting policies and estimates since the 2024 Form 10-K[111] - Market risks described in the 2024 Form 10-K remain unchanged[112] Digital Sales - Digital sales increased by 2.4% in the third quarter, representing 28% of net sales, compared to 26% in the same period last year[70]