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Kohl's profit drops but meets Wall St. view

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POSTED August 15, 2013 9:32 p.m.

MENOMONEE FALLS, Wis. (AP) — Kohl's second-quarter net income declined 4 percent as expenses climbed, and the retailer trimmed its outlook for the year.

Still, quarterly results met analysts' expectations, and the shares rose Thursday.

For the period ended Aug. 3, Kohl's Corp. earned $231 million, down from $240 million in the same months a year earlier.

On a per-share basis, earnings rose 4 cents to $1.04 because the company had fewer shares outstanding.

Revenue for the Menomonee Falls, Wis., company increased 2 percent, to $4.29 billion from $4.21 billion partly on strong sales of children's goods, footwear and men's items.

Analysts expected quarterly earnings per share of $1.04 on revenue of $4.29 billion.

Kohl's also benefited from offering customers exclusive and private label brands. Sales of the Jennifer Lopez, Marc Anthony and Rock & Republic brands reported double-double increases. Private brands such as SO and Jumping Beans also posted double-digit sales growth.

And while the critical back-to-school selling season has been a struggle for some retailers so far, Kohl's says sales of kids, juniors, young men's and footwear are all off to a good start.

Revenue at stores open at least a year, a key gauge of a retailer's health, edged up 0.9 percent. A year ago, the measure dropped 2.7 percent. This figure excludes results from stores recently opened or closed.

President, Chairman and CEO Kevin Mansell said during a conference call that online sales provided a nice boost, climbing 28 percent in the quarter. This help to combat lower prices and a decline in store traffic.

Weather also played a role, as sales were better in warmer weather areas such as the West, South Central and Southeast. Cooler weather in the Midwest and Northeast led to a low single-digit decline in revenue at stores open at least a year. Mansell said the Mid-Atlantic region was the worst performer.

But the company's overhead expenses rose nearly 3 percent, to $1 billion.

Kohl's trimmed 10 cents off the top of its earnings guidance for the year, now predicting a profit of $4.15 to $4.35 per share. Analysts expect earnings of $4.34 per share, according to FactSet.

The retailer anticipates third-quarter earnings between 83 cents and 92 cents per share. Wall Street predicts earnings of 94 cents per share.

Stern, Agee & Leach's Charles Grom said in a client note that the quarterly results were OK, but that he was surprised a bit by the revised full-year guidance and lower-than-expected third-quarter forecast. Still, the analyst said he's pleased that Kohl's is getting a better handle on inventory levels.

Grom maintained a "Neutral" rating and reduced the company's price target to $54 from $56.

Kohl's has 1,155 stores in the U.S. Its stock climbed $2.50 to $53.34 in midday trading. The shares have traded in a 52-week range of $41.35 to $55.25.


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