Credit: Shutterstock photoKohl's ( KSS ) on Monday joined fellow department-store chains Macy's ( M ) and J.C. Penney ( JCP ) in reporting stronger-than-expected holiday retail sales, while several other retailers in the beleaguered sector also anticipate an overdue bump from the holiday season.
[ibd-display-video id=3070987 width=50 float=left autostart=true] Retail stocks were on the move in early trade, as both Lululemon Athletica ( LULU ) and Darden Restaurants ( DRI ) raised guidance, while Dave and Buster's (PLAY) cut and Five Below (FIVE) issued downbeat guidance. Meanwhile, Walgreens Boots Alliance (WBA) expects a 5% boost to its 2018 profit outlook thanks to recently enacted tax reform.
Kohl's November-December same-store sales surged 7% from a year ago, allowing the department-store chain to raise its estimates for the fiscal year ending in January. It now sees diluted earnings per share of $4.10-$4.20 vs. a previous estimate of $3.72-$3.92. Analysts consensus called for Kohl's to report a profit of $3.64 a share for the year, according to Thomson Reuters.
"We are very pleased with our holiday-period sales, which were consistently strong through November and December," said Kevin Mansell, Kohl's CEO. He reported positive comps across "all lines of business and all regions," as well as growth in online sales and stronger foot traffic in the holiday period.
Shares of Kohl's gained 4.7% to 56.90 on the stock market today , pulling back from a 13-month high of 59.09 soon after the open. Kohl's briefly cleared a 57.38 cup-with-handle buy point intraday. But the Relative Strength line, which tracks the stock's performance vs. the S&P 500 index, is lagging and is below even its short-term high of the handle.
Kohl's has partnered with Amazon (AMZN) and athletic clothing brands Under Armour (UAA) and Nike (NKE) to attract customers to its stores. Kohl's releases its Q4 and fiscal 2017 results March 1.
Macy's fell 0.2% while J.C. Penney climbed 3%. The department-store chains said last week that November-December same-store sales grew 1% to 3%. But both stocks still sold off on the news following recent uptrends.
One problem for retail stocks is that many have run up sharply in recent months amid hopes for strong holiday sales. But Wall Street is still worried about brick-and-mortar retailers' long-term prospects in the age of Amazon .
Wal-Mart Stores (WMT) hasn't given a holiday sales update, but is generally seen as a viable challenger to Amazon. Wal-Mart shares rose 1.5% to 101.61, nudging past a 100.23 buy point. But the RS line isn't confirming the move, which also is coming on so-so volume. Wal-Mart hasn't yet given a holiday sales update.
Lululemon Athletica raised its Q4 earnings and revenue guidance on the back of strong holiday sales. It now expects adjusted diluted EPS in the range of $1.25 to $1.27 for Q4 vs. a previous range of $1.19 to $1.22. It forecasts revenue of $905 million to $915 million vs. a previous $870 million to $885 million.
Darden upgraded its outlook for adjusted diluted net EPS from continuing operations for fiscal 2018 to $4.70-$4.78, from $4.45-$4.53 previously. The revised estimate includes plans to invest roughly $20 million in its workforce. It continues to see same-restaurant sales growth of 2%, but now expects an approximately 18% effective tax rate vs. a previous 25%.
However, Dave and Buster's lowered its fiscal 2017 outlook as it reported comparable-store sales were down 5.1% in the fourth quarter through Jan. 6. It expects total revenue for fiscal 2017 of $1.138 billion to $1.142 billion vs. a prior $1.148 billion to $1.155 billion, and sees comparable-store sales ranging from -1.0% to -0.7% vs. a prior 0% to 0.75%. Net income for the year is now seen at $108 million to $110 million vs. a prior $110 million to $112 million.
Five Below reported a 26.7% jump in holiday net sales to $442.6 million, with comp sales growing 6.7%. Despite the holiday bump, the specialty discounter expects Q4 and full-year fiscal 2017 earnings for the period ended Feb. 3 "near the high end" of its previous guidance. The period includes a noncomparable week, or "53rd week," in the fourth quarter, it added.
Five Below, whose products cater to teens and tweens, now expects net sales of $491 million to $503 million in Q4, and $1.264 billion to $1.276 billion in fiscal 2017. Comparable-store sales should increase 4% to 6% in Q4, and 5.7% to 6.5% in fiscal 2017. It sees diluted income per common share of $1.09 to $1.16 in Q4, and $1.72 to $1.79 in fiscal 2017.
Walgreens disclosed Monday it foresees a tax benefit of $200 million for fiscal 2018 from the recent tax reform, MarketWatch reported. The drugstore chain is said to expect adjusted EPS to rise by 30 cents to 35 cents as a result of the legislation, above the current 2018 FactSet EPS consensus of $5.61.
CVS Health (CVS) announced a tax-cut boost to cash flow last week.
Shares of Lululemon fell 0.5% to 79.04 in morning trade on the stock market today , off intraday lows of 77.44 but below the morning peak of 81.92, the best since mid-2013.
Five Below sank 7.5% to 66.95.
Darden slipped 0.6%, near 98.74. Dave and Buster's, which was already well off its 2017 highs, plunged 20% to 44.92, a 52-week low. Walgreens added 0.3% to 73.10.
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Many retailers are upgrading their financial outlooks as an improving global economy instills confidence in consumers. But investors may be worried whether the retail momentum witnessed in the holiday period will continue into 2018, given the same-store declines and store closures that plagued the sector for several years.
Amazon, an IBD Leaderboard stock currently in buy range, rose 1.4% 1,246.87, hitting a new high intraday. Volume was modestly above normal, after a low-trade breakout Friday. while Under Armour and Nike ticked up fractionally.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
