Kohl's earnings down

16.05.2008 05:01 Shopping - Source: JS Online

Kohl's Corp. said earnings fell nearly 27% in the first three months of its fiscal year, but it still beat Wall Street's estimates by a nickel a share on the strength of inventory management.

But based on those results and a tepid sales outlook, the company lowered its earnings guidance for the full year to a range of $2.95 to $3.15 a share.

The company's earlier guidance called for a range of $3.15 to 3.50 for the year ending in January 2009. The average estimate of analysts reporting to Bloomberg called for earnings of $3.11 for the year.

"In this environment, they're managing the business pretty well," said Edward Maraccini, portfolio manager with Optique Capital Management in Racine. "We still think Kohl's outperforms its peer group."

Kohl's said it expects an increase in total sales for the year of 2% to 4%, and a decline in same-store sales of as much as 5%.

The Menomonee Falls department store chain reported net income for the quarter of $153 million, or 49 cents a share, down from $209 million, or 64 cents, a year ago. Analysts were expecting the company to earn 44 cents a share. Sales were $3.62 billion, up 1.5% from $3.57 billion.

Before earnings were released, Kohl's shares closed at $50.49, up 90 cents.

The amount of merchandise in each store is down more than 9% from last year, Kohl's President Kevin Mansell said in a conference call Thursday with analysts. Inventory management, which includes bringing merchandise into stores closer to the time of sale, has helped Kohl's to avoid steep markdowns, Mansell said.

Inventories were lowest in seasonal and high-fashion lines, which could be slower to sell in a sluggish economy. Meanwhile, Kohl's is staying in stock in more basic items, he said.

The company plans to step up its marketing efforts this summer in hopes of attracting stimulus-check spending, Mansell said.

Same-store sales for the coming quarter are expected to decline from 3% to 5%, Mansell said. May will be the weakest month in the quarter because Kohl's is facing a difficult comparison with a strong May 2007.

New brands, including Jumping Beans children's clothing, Gold Toe socks, Bobby Flay kitchen products, and Elle, a women's fashion line, are performing well, Mansell said. Brands launched last year, including Vera Wang and Food Network, also are selling well, he said.

The home area of the store was the weakest. "We don't see that turning around in the near future," Mansell said.

Kohl's opened 28 new stores in the first quarter and has plans to open another 47 stores in the second half of the year. The company will announce expansion plans for 2009 with its second-quarter financial report.

Chairman and Chief Executive Officer Larry Montgomery has said Kohl's is slowing the pace of its store openings and likely won't reach its previous goal of 1,400 stores by 2012.

"We continue to expect 2008 to be a challenging year," Montgomery said in the conference call.

J.C. Penney profits drop

Meanwhile, rival J.C. Penney on Thursday reported first-quarter profit had been halved and on Thursday predicted "difficult" conditions for the entire year as consumers pull back on spending.

Net income fell to $120 million, or 54 cents per share, from $238 million, or $1.04 per share, a year ago, the Plano, Texas-based retailer said.

Total sales fell 5% to $4.13 billion from $4.35 billion.

Profit per share was better than the 50 cents expected from analysts surveyed by Thomson Financial, and the retailer's shares rose $2.07, to $46.32. Analysts expected slightly higher revenue of $4.17 billion.

"Our financial performance in the first quarter was clearly impacted by the weakened consumer environment," said Myron E. Ullman III, chairman and chief executive of Penneys.

Kohl's Corp.

Figures in millions except for earnings per share. Percentages are based on unrounded sales and income figures.

The Associated Press contributed to this report.

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