Kohl's Q3 Earnings Coming Up: Factors Investors Need to Understand

Core Insights - Kohl's Corporation is expected to report declines in both sales and earnings for the third quarter of fiscal 2025, with sales estimated at $3.49 billion, reflecting a 5.9% decrease year-over-year, and an earnings loss of 19 cents per share, a 195% decline from the previous year [1][3]. Group 1: Earnings Performance - The consensus earnings estimate for Kohl's has decreased by 2 cents over the past month, indicating a significant year-over-year plunge [1]. - Kohl's has historically delivered an earnings surprise of 29.2% on average over the last four quarters, with a notable 69.7% surprise in the most recent quarter [2]. Group 2: Market Conditions - The company is facing a challenging demand environment, particularly among its core lower- to middle-income customers, leading to soft store traffic and reduced sales from Kohl's Card customers [3]. - Comparable sales are projected to decline by 4.6% in the upcoming quarter due to subdued discretionary spending [3]. Group 3: Cost and Pricing Pressures - Kohl's is experiencing increasing cost pressures, including expanded coupon eligibility and potential tariff impacts, which are expected to affect margins in the fiscal third quarter [4]. - The company has been focusing on stronger value messaging and higher digital penetration, which have limited near-term margin expansion despite improved proprietary brand mix and disciplined inventory management [4]. Group 4: Category Trends - There are uneven trends across product categories, with Kids and Men's categories lagging, although some improvement has been noted in denim and backpacks [5]. - The company is in the process of rebuilding inventory depth after earlier reductions, which may temper short-term gains [5]. Group 5: Earnings Whispers - The current model predicts a potential earnings beat for Kohl's, supported by a positive Earnings ESP of +1.77% and a Zacks Rank of 3 [6]. - Other companies with favorable earnings combinations include Five Below, which is expected to report a 15% increase in revenues, contrasting with Kohl's anticipated declines [8].