What: Shares of department store operator Kohl's (NYSE:KSS) slumped on Thursday after the company reported its second-quarter results, missing analyst estimates for both revenue and earnings. At 12:20 p.m. Thursday, the stock was down about 9.5%.
So what: Kohl's reported revenue of $4.27 billion, up 0.6% year-over-year but about $40 million short of the average analyst estimate. This growth was driven by an increase in the store count to 1,164, up from 1,160 at the same point last year, as well as comparable-store sales growth of 0.1%.
The company reported GAAP EPS of $0.66 per share, down significantly year-over-year, but a one-time charge related to debt extinguishment was mostly responsible for the decline. Excluding this charge, EPS declined by 5.6% year-over-year to $1.07, which was $0.09 lower than analysts were expecting.
Gross margin declined slightly to 38.9%, while SG&A expenses rose faster than revenue, increasing by 2.4% year-over-year. Operating margin slumped to 9.9%, down from 10.6% during the same period last year, and Kohl's now expects its full-year EPS, excluding debt extinguishment charges, to come in at the low end of its previous guidance range of $4.40 to $4.60.
Now what: Kohl's results were certainly disappointing relative to analyst estimates, but the second quarter marks a significant improvement compared to the same quarter last year. While comparable-store sales grew at a sluggish 0.1%, that's a far better result than the 1.3% comparable-store sales decline Kohl's reported during the second quarter of 2014.
Despite this progress, a decline in earnings and lower guidance for the full-year were enough to send the stock tumbling. Shares of Kohl's have now fallen about 30% over the past few months as sentiment seems to have completely reversed on the retailer. While Kohl's results certainly weren't great, the large decline today seems a bit overdone.