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March 14, 2025

Kohl's Shares Plunge After Dividend Cut and Weak Sales Outlook

Hi Enthusiast,

Kohl’s, the iconic department store chain, is facing significant challenges as it grapples with weaker-than-expected earnings and a cautious outlook for the year ahead. In early trading, the company’s stock tumbled by as much as 20%, following a disappointing report for the Q4 holiday quarter. Despite a few bright spots, such as adjusted diluted earnings per share of $0.95, which exceeded analyst expectations of $0.73, the overall performance fell short of investor hopes.

Revenue for the quarter reached $5.17 billion, slightly below the anticipated $5.18 billion. More concerning, however, was the nearly 7% decline in comparable (same-store) sales, which missed expectations and pointed to softer demand across Kohl’s locations. In an effort to preserve cash flow amid these struggles, the retailer made the difficult decision to slash its quarterly dividend from $0.50 to $0.12. This move underscores the tough environment the company is navigating.

Kohl’s, like many of its peers in the retail sector, is seeing a pullback from lower-income consumers, a trend that is particularly noticeable among shoppers earning under $50,000, and even those with incomes under $100,000.

While inflation has eased slightly, the company’s management noted on the earnings call that these groups are cutting back on nonessential purchases, a trend that could persist in the coming months. The company also acknowledged the ongoing challenge of balancing its promotional strategies, particularly when it comes to integrating popular national brands with its own private-label offerings. Despite these hurdles, Kohl’s did emphasize that its supply chain remains strong, with no significant overreliance on any one country or region.

Looking ahead, Kohl’s is bracing for further difficulties. The company has forecast a 5% to 7% decline in net sales for the year, a sharp drop that falls well below Wall Street’s expectations. Earnings guidance for the full year is also bleak, with Kohl’s projecting diluted earnings per share (EPS) in the range of $0.10 to $0.60. This range is considerably lower than the analyst consensus of $1.22, and even the higher end of the company’s EPS guidance falls below the lowest estimates from analysts. This forecast adds to a growing trend of retailers offering disappointing guidance for 2025, further weighing on investor sentiment.

In addition to these concerns, Kohl’s is bracing for more challenges in the form of weaker comparable sales, and it has already announced the closure of its 27th store. With such a tough road ahead, Kohl’s will need to navigate a host of obstacles in the coming months if it hopes to regain its footing in a rapidly changing retail environment.

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Oracle Misses Expectations, Stock Takes a Hit

Shares of Oracle (ORCL) took a significant tumble on Tuesday after the software giant reported quarterly results that fell short of Wall Street's expectations. The company posted adjusted earnings per share of $1.47, missing the forecast of $1.49. Additionally, its revenue came in at $14.13 billion, which was below the expected $14.40 billion. These disappointing numbers have investors worried, especially as Oracle also reduced its guidance for fiscal Q4, signaling weaker-than-anticipated earnings moving forward.

Despite the overall miss, there were some bright spots in Oracle's report. One of the highlights was the company's sales backlog, referred to as "remaining performance obligations" (RPO), which reached an impressive $130 billion. This was driven by a $48 billion increase in fiscal Q3, pointing to strong demand for Oracle's cloud computing services. The backlog suggests that the company is seeing robust future sales, which could provide some reassurance for investors in the long term.

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However, not all analysts were optimistic about Oracle's prospects. In a note following the earnings release, Morgan Stanley analysts highlighted a shift in investor sentiment regarding large database investments, particularly for AI training purposes. As the landscape around artificial intelligence evolves, there are growing concerns that companies may be rethinking their approach to building expansive databases, which could impact Oracle's future growth in this space.

With these mixed results and changing market dynamics, Oracle's stock is facing increased scrutiny. While the company has strong fundamentals in some areas, its struggles in meeting earnings expectations and adapting to shifting trends in AI could weigh heavily on its performance in the near term.

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