Kohl's Q3 Profit Beats Estimates, But Macy's Earnings Miss

(RTTNews) - Department store chain Kohl's Corp. (KSS) on Thursday reported a profit for the third quarter that beat analysts' expectations, while Macy's Inc. (M) reported quarterly earnings that missed estimates.

Both the companies reaffirmed their fiscal 2016 earnings outlook, and Kohl's increased its share repurchase authorization to $2 billion.

In addition, Macy's said it has formed a strategic alliance with Brookfield Asset Management Inc. (BAM) to further explore value creation opportunities in its real estate portfolio.

Under the alliance, Brookfield will have an exclusive right for up to 24 months to create a "pre-development plan" for each of approximately 50 Macy's real estate assets, with an option for Macy's to continue to identify and add assets into the alliance.

Kohl's third-quarter net income was $146 million or $0.83 per share, up from $120 million or $0.63 per share in the prior-year quarter. The year-ago quarter's results included a debt extinguishment loss of $169 million.

Adjusted net income was $0.80 per share, compared to $0.75 per share a year ago. On average, 22 analysts polled by Thomson Reuters expected the company to report earnings of $0.70 per share. Analysts' estimates typically exclude special items.

Net sales declined 2.3 percent to $4.33 billion from $4.43 billion in the same quarter last year. Analysts' were looking for revenue of $4.33 billion.

Comparable store sales declined 1.7 percent, compared to an increase of 1.0 percent last year.

Kohl's board of directors declared a quarterly cash dividend of $0.50 per share.

For fiscal 2016, Kohl's reaffirmed its outlook for reported earnings in a range of $3.12 to $3.32 per share and adjusted earnings of $3.80 to $4.00 per share. The Street expects earnings of $3.87 per share.

Meanwhile, Macy's reported an 86 percent fall in third-quarter profit from last year, reflecting one-time charges and lower sales.

The company's third-quarter net income was $17 million or $0.05 per share, down sharply from $118 million or $0.36 per share in the prior-year quarter.

The latest quarter's results include non-cash retirement plan settlement charges of $0.12 per share, while the year-ago period results include asset impairment charges of $0.20 per share.

Excluding these, adjusted earnings were $0.17 per share, compared to $0.56 per share last year. Analysts expected earnings of $0.41 per share.

Net sales declined 4.2 percent to $5.63 billion from $5.87 billion in the year-ago period and missed analysts' consensus estimate of $5.65 billion. The year-over-year decline in total sales largely reflects the closing of 41 underperforming stores in 2015.

Comparable sales growth, on an owned plus licensed basis, declined 2.7 percent. On an owned basis, comparable sales declined by 3.3 percent.

For fiscal 2016, Macy's affirmed its outlook for earnings of $3.15 to $3.40 per share, excluding asset impairment charges and retirement settlement charges. The Street is currently looking for earnings of $3.35 per share for the year.

The company now expects full-year 2016 comparable sales on owned plus licensed basis, sales to decrease in the range of 2.5 percent to 3 percent, compared to the prior range of down 3 percent to 4 percent, with comparable sales on an owned basis to be about 50 basis points lower.

Macy's has also signed a contract to sell its 248,000 square-foot Union Square Men's building in San Francisco for $250 million. The company expects the transaction to close in January 2017 and also expects to recognize a gain of about $235 million in January 2018.

In addition, Macy's has signed a contract to sell its downtown Portland, Oregon store for $54 million. The transaction is expected to close in the fourth quarter of 2016, at which time a gain of about $36 million will be recognized.

The downtown Portland store will continue operations through the holiday season and will be closed in spring 2017.