DOW JONES NEWSWIRES
Kohl's Corp.'s (KSS) fiscal fourth-quarter net income dropped
18% as the recession and challenging retail environment hurt the
company's bottom line.
The department-store chain also offered disappointing outlooks
for the first quarter and fiscal year, sending shares down 5.3% in
after-hours trading to $33 even though the fourth quarter's results
topped muted Wall Street expectations.
Though many have seen Kohl's as a defensive play in the retail
sector, the outlook and drop in earnings suggest the company isn't
immune from one of the worst holiday seasons ever in 2008. The
recession forced shoppers to sober up from their normal frivolity,
hitting retailers' top lines and margins.
For the quarter ended Jan. 31, the department-store chain
reported net income of $336 million, or $1.10 a share, compared
with $412 million, or $1.32 a share, a year earlier.
Three weeks ago, Kohl's said sales dropped 4.6% to $5.24 billion
as same-store sales slumped 9.1%. However, the retailer said at the
time that stronger-than-anticipated January sales would push
earnings above the 99 cents a share then expected by Wall Street.
Still, that outlook was well below the company's August forecast.
Analysts most recently expected earnings of $1.03.
Gross margin widened to 34.8% from 34.3%, while operating
expenses rose 4.3%. Inventory totaled $2.8 billion on Jan. 31, down
2% from a year earlier.
As of Jan. 31, Kohl's operated 1,004 stores, up 8%, in 48
states. The company has gained market share in recent years by
offering exclusive lines from designers, such as Vera Wang, as well
as low-cost products. Kohl's also has benefited from the bankruptcy
of Mervyn's last summer, having bought some of the now-defunct
department-store retailer's stores.
Still, Goldman Sachs slapped a rare sell rating on the stock two
weeks ago, citing concerns that earnings estimates and its
valuation may be too optimistic. Earlier in February, Standard
& Poor's Ratings Services warned that the department-store
sector was feeling the full brunt of the U.S recession, which the
ratings firm said would likely worsen through the first half of
2009.
On Thursday, Kohl's added to those concerns, saying it expects
earnings of $2 to $2.30 a share for its new fiscal year, with total
sales falling 1% to 4% and comparable-store sales falling 5% to 8%.
For the first quarter, the company expects earnings of 27 cents to
34 cents a share, assuming the comparable-store sales decline of 5%
to 8%.
"We expect 2009 to be just as challenging from a macroeconomic
perspective. We are planning conservatively in our sales
expectations, inventory levels and expenses," President and Chief
Executive Kevin Mansell said.
A Thomson Reuters analyst poll projected earnings of $2.39 a
share and a 1% decline in revenue to $16.16 billion for the fiscal
year. For the first quarter, Wall Street expects earnings of 35
cents a share and a 3% decline in revenue to $3.5 billion.
Kohl's plans to open about 55 stores and remodel 51 in the
current fiscal year, which would represent a small rise from
previously planned store openings but a small cut in remodels. In
mid-2008, it scaled back plans to have 1,400 stores by 2012, which
would have worked out to slightly more than 100 new stores a year
on average.
-By Jay Miller, Dow Jones Newswires; 201-938-2331;
jay.miller@dowjones.com