• WWD

Kohl’s Sales Inch Up, Profits Slip During Q3


Back-to-school and post-hurricane sales boosted the retailer's sales.

Kohl’s Corp. logged a modest sales gain during the third quarter, despite millions in lost sales from record hurricanes as profits fell once again.

The mixed results saw shares of the company yo-yo throughout the day, falling to a monthly low of $38.15 before rising 1 percent to close at $41.17.

Kohl’s posted net sales for the quarter ended Oct. 28 of $4.33 billion, compared with $4.32 billion during the same period last year, but net income came in at $117 million, down from $146 million. Comparable sales rose by 0.1 percent, compared with a 1.7 percent decline last year.

Bruce Besanko, Kohl’s chief financial officer, noted during a call with financial analysts that store traffic improved steadily throughout the quarter, leading to the slight comp increase, but said a record hurricane season forced the temporary closure of more than 100 stores. These closures accounted for an estimated $15 million in lost sales.

Kohl’s recently launched a tie-up of sorts with Amazon — it’s dedicating space in a number of stores to the e-tailer and its branded products and accepting online returns in 82 stores — which could have played a part in the traffic, but outgoing chief executive officer Kevin Mansell didn’t give any details on how the deal is going.

“The objective from our perspective is very simple and very straightforward, we believe both of these tests have the potential to drive incremental traffic to our stores, which is our number one priority,” Mansell said.

The ceo did cite back-to-school and activewear, where sales grew 20 percent driven by Nike, Adidas and Under Armour, for the sales boost, but he admitted most of September was “weak.”

Mansell added “unseasonably warm weather throughout almost all of our regions” to impact from hurricanes as the cause, but said things turned positive again in the latter half of October, driven by lower levels of clearance merchandise and an uptick in regular priced sales.

He also pointed to Kohl’s “targeted efforts to capture share from competitive store closures in some of our trade areas,” and said this will continue and even “accelerate” throughout the rest of the year.

Sales for women’s apparel still dropped during the quarter, but Mansell said this multi-quarter trend is improving, “particularly in our private brands.” Accessories were also a “lag” on the company, and sales there were down in the mid-single digits.

Private brands were a bright spot, however, as “substantially all brands reported improved trends,” according to Mansell. Kohl’s exclusive Vera Wang and Lauren Conrad brands grew by double digits.

Kohl’s effort to transition many of its stores to a smaller format is also paying off, and Mansell said recent openings of 35,000 square-foot stores has been “extremely successful,” while driving lower overall inventory levels and a related improvement in profitability.

“Beyond the potential for growth these stores provide us, they importantly provide us insights into how we can operate our other stores more effectively in the future,” Mansell said.

Kohl’s added that it expects full-year earnings per share to come in between $3.72 and $3.92, but did not project full-year sales. Last quarter, after posting a decline in sales and profits, Mansell said sales could come in between flat and a 2 percent increase for the full year.

Brian Tunick of RBC Capital Markets said he found it “encouraging” that traffic improved again in the third quarter, but he’s still “skeptical of a material improvement in [fourth quarter] comps given the still very challenging environment.”

Tunick added that he’s hoping for “more details around the ceo transition plan,” which will see merchandising and customer lead Michelle Gass takeover from Mansell, and the partnership with Amazon come fourth quarter results.


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