Why Kohl's Corporation Stock Tumbled Today

What happened

Shares of Kohl's Corporation (NYSE: KSS) were sliding today even as the retailer posted strong results in its fourth-quarter earnings report. The stock was up in pre-market trading, but the market seemed to be disappointed with the company's guidance for 2018. By 10:54 a.m. EST, the stock was down 7.3%.

So what

Investors had already expected a strong quarter as Kohl's posted blowout holiday season numbers, with comparable sales up 7%, and raised its guidance. For the full quarter, which included an extra week, the company's comparable-store sales were up 6.3%, and overall revenue increased 9.2% to $6.78 billion, beating estimates at $6.74 billion. Gross margin ticked up 43 basis points to 33.8% as merchandise margins improved as the company cut inventory and scaled back markdowns. Adjusted earnings per share excluding the effect of tax reform came in at $1.87, up from $1.44 a year ago and ahead of expectations at $1.77.

CEO Kevin Mansell said he was "very pleased" with the results in the quarter, and said that all areas effectively managed their expenses, which, combined with higher sales led to strong profit growth. Kohl's also raised its quarterly dividend 11% to $0.61, good for a dividend yield of 4%.

Now what

The sell-off was surprising, but the market may have been expecting stronger guidance for 2018. Management projected comparable sales to come in flat or grow by up to 2%, indicating a slowdown from the fourth quarter; the midpoint of that range is down from 1.5% in 2017. Guidance for total revenue growth of negative 1% to 1% was in line with analyst expectations, and seems to reflect a handful of store closures.

Due to the new tax law, the company sees earnings per share jumping to $4.95 to $5.45 this year, up from $4.19 last year. At those numbers, Kohl's looks like a solid bet after today's mysterious sell-off.

10 stocks we like better than Kohl'sWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Kohl's wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 5, 2018

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.