What happened

Shares of Kohl's (NYSE:KSS) soared today, up by 11% as of 2:50 p.m. EST, after the company reported third-quarter earnings. The results beat expectations and Kohl has announced plans to reinstate its dividend.

So what

Revenue in the fiscal third quarter was $4 billion, ahead of the $3.9 billion in sales that Wall Street analysts  were expecting. That resulted in adjusted net income of $2 million, or $0.01 per share, while investors were bracing themselves for $0.43 per share in losses. The retailer posted a 13% drop in comparable store sales as the COVID-19 pandemic continues to negatively impact brick-and-mortar stores.

Drive up sign in front of a Kohl's store

Image source: Kohl's.

"Our third-quarter results exceeded our expectations with significant sequential sales and profitability improvement," CEO Michelle Gass said in a statement. "Digital sales growth remained strong and our actions to improve our gross margin showed great progress."

Now what

Kohl's fully repaid its revolver during the quarter and still has $1.9 billion in cash on hand. Gass said that the company was able to pay down that debt thanks to strong cash flow generation. Kohl's has generated $910 million in operating cash flow year to date.

Near the onset of the pandemic, Kohl's had suspended its dividend while securing the $1.5 billion revolver. The credit facility had imposed certain restrictions on the company's ability to pay dividends. Now that the revolver is paid off, Kohl's plans to resume those payouts to investors in the first half of 2021. On the conference call with analysts, Gass said that the company would be "thoughtful on how we reinstate a dividend," without specifying how much the dividend will be. The last quarterly dividend Kohl's declared in February was for $0.70 per share.

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