UPDATE: Kohl's Profit Jumps 45%; 2Q EPS View Below Estimates
May 13 2010 - 12:30PM
Dow Jones News
Kohl's Corp. (KSS), which reported strong quarterly sales, says
business is improving across the country, but stopped short of
saying economic conditions are back to normal.
The department-store chain, which has been one of the best
performing retailers during the economic downturn, said its sales
swelled as a result of greater demand and market share as it
improved online services and expanded use of its own brands and
exclusive apparel by designers like Vera Wang and Dana Buchman.
"People did buy more merchandise than a year ago, but they are
still indicating deep caution," Chief Executive Kevin Mansell said
in an interview.
Kohl's is taking several steps to bring current and new
customers through its door. The measures include taking a more
local approach, a strategy that rival Macy's Inc. (M) appears to be
using effectively based on the solid first-quarter results it
posted on Wednesday. Also like Macy's, Kohl's feels it is taking
market share. The gains are coming at the expense of other
department stores and mass merchants, Mansell said. Digital efforts
include Kohl's setting up in-store kiosks to connect customers with
the company's website and piloting in-store screens that carry
product and pricing information.
Kohl's first-quarter results showed it is seeing customer
traffic, as transactions rose almost 9%, their biggest increase in
almost eight years. Home goods, footwear and women's merchandise
saw some of the best growth rates. Mansell also said that some
categories, like home goods and footwear, are starting to see signs
of inflation, coming after a lengthy period of falling prices.
Kohl's did raise its earnings projection for the full year but
provided guidance for the current quarter that is below Wall
Street's expectations. "We think, in a continued uncertain
environment, it's a rational way to approach things," Mansell said.
"Consumers are still pressured by the same issues."
The retailer expects sales at stores open more than a year to
rise in the 2% to 4% range for the second quarter and its gross
margin to grow by 20 to 30 basis points after increasing 48 basis
points in the first quarter.
Kohl's, which sells midpriced apparel, accessories and home
decor, reported a first-quarter profit of $199 million, or 64 cents
a share, up from $137 million, or 45 cents, a year earlier.
Gross margin rose to 38.1% from 37.6% and same-store sales
increased 7.4%.
Last week, Kohl's said revenue jumped 11% to $4.04 billion, and
same-store sales rose 7.4%, outpacing the retailer's February
forecast.
Kohl's raised its profit outlook for the year to $3.57 to $3.75
a share from February's view of $3.40 to $3.63. Kohl's also
forecast current-quarter earnings of 70 cents to 75 cents a share,
lower than the 88-cent consensus estimate of analysts surveyed by
Thomson Reuters.
Kohl's shares are down $1.67, or 2.9%, to $55.48.
-By Karen Talley, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
(Nathan Becker contributed to this article.)
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