Fiscal 2009 Outlook
Markdown optimization will continue to benefit the firm in its third year of use even with these lower inventory levels.
- Size optimization initiatives continues to develop and the firn now expects significant benefits this fall with a goal of 70% of the sized receipts on the program by the end of fiscal 2009.
- The economy will continue to be very challenging through 2009 and thus very difficult for the customer.
- The marketing strategy centers on the opportunity already inherent in the Kohl''s brand positioning us as the smartest customer choice and ultimately to continue to gain share in 2009 just as the firm did in 2008.
Marketing expense is being planned in line with total sales on a rate basis.
- The firm intends to continue to optimize the marketing mix, increase investment in direct mail and digital advertising while still maintaining strong support in inserts, television and radio.
- The firm aims utilize its strong financial position to continue to expand in new and existing markets and continue its remodel program in order to grow market share in a very difficult environment.
- Kohl''s is planning to open approximately 55 stores in 2009 with 19 opening in the spring including its entry into Alaska the 49th state.
- This is a slight increase from the previous projection of 50 stores as the firm was able to secure an additional five Mervyns locations after the auction where it obtained the rights to 31 locations.
In addition the firm plans to remodel 51 stores in the spring season an increase from 36 in 2008.
- These remodels will be split into three waves and reopen in March, May and August and remodel duration has been compressed from 16 to nine weeks over the past two years in order to minimize the disruption to the stores and the cost of the remodels.
- The increase in the number of remodels differentiates Kohl''s from the competition and is a critical part of the long term strategy. It is extremely important to maintain the existing store base in a tough economy with significant competition for customers whose disposable income is shrinking.
Demand is expected to continue to be weak throughout 2009.
- For both the quarter and the year a total sales decrease of 1% to 4%; comp sales a negative 5% to negative 8%; gross margin performance of flat to up 10 basis points over last year; and SG&A dollars to increase 3% to 4% over last year is anticipated.
- This would result in earnings per diluted share of $2.00 to $2.30 for fiscal 2009 and 27 cents to 34 cents for the fiscal first quarter.
- This guidance does not reflect any additional share repurchases in fiscal 2009.
Key questions and answers from the fourth quarter earnings call as presented by Kohl''s Corporation on February 26, 2009
Jeffrey P. Klinefelter (Piper Jaffray): On the credit, can you give us any more insights on your expectations for receivable next year?
Wesley S. McDonald: We have seen approval rates deteriorate quite a bit in the fall, particularly in the fourth quarter and we have built that expectation in our guidance.
Jeffrey P. Klinefelter (Piper Jaffray): Are they going to be with tighter underwriting standards are you anticipating those receivables dropping, any pressure from that on comps?
Wesley S. McDonald: We have tightened our standards especially in high risk states, the states that most folks are continuing to mention, California, Florida, Arizona, Nevada.
We are also seeing some deterioration in some other states in the Midwest related to the auto industry. It is going to be of benefit to us in terms of leveraging next year. I do not expect it to be as big a benefit as it was this year, however that is built in our guidance and SG&A.
Jeffrey P. Klinefelter (Piper Jaffray): And how does this flow through your income statement and when might it start deteriorating, the contribution that you have been receiving?
Wesley S. McDonald: We treat it as a contra SG&A account and we settle up with Chase on a monthly basis and it is really a net revenue number which takes into account finance charges plus late fees plus any other revenue less bad debt expense.
We also do all the customer service and marketing on that, that is all on the nickel and all built into the SG&A assumptions we gave you earlier.
Jeffrey P. Klinefelter (Piper Jaffray): Is there an efficiency that you are starting to gain by leveraging the online medium a little bit more so than print and can that drop your dollars?
Kevin Mansell: Marketing is planned essentially in line with sales on a rate basis. So think about it from that perspective.
|
