This summary is based on the second quarter fiscal 2008 earnings call conducted by Kohl’s Corp. (KSS) on August 14, 2008.
Management:
President: Kevin Mansell
CEO: Larry Montgomery
CFO: Wesley McDonald
Key Investor Issues:
- Quarter-to-quarter EPS decreased from 83 cents to 77 cents.
- Half year net income decreased 18.7% to $389 million.
- Q3 EPS are forecast to be in the range of 51 cents to 56 cents.
Half Year Financial Highlights:
- Net income decreased from $478.2 million, or $1.48 to $389 million, or $1.26.
- Net sales increased 2.6% to $7.3 billion from $7.2 billion a year ago.
- The comparable store sales decreased 5.6% for the same period.
- The company opened 28 stores during the first six months.
Second-Quarter Financial Highlights:
The comparable store sales for the quarter decreased 4.6% driven largely by lower transactions per store which dipped 4.4%.
- The average unit retail increased 1.5% but was offset by a 1.7% decline in units per transaction.
- This resulted in an overall 0.2% decrease in average transaction value.
- The year-to-date comp sales decreased 5.6%.
- The average unit retail was flat to last year and units per transaction decreased 1% resulting in the same decrease in average transaction value.
- The transactions per store decreased 4.6%.
The company ended the quarter with 957 stores in 47 states versus 834 stores in 46 states at the same time last year.
- The gross square footage was 84,942, an increase of 18.4% over last year and selling square footage was 74,452, being an increase of 17.2% over last year.
- The management expects to open an additional 47 stores later this year for a total of 75 stores in fiscal 2008.
- In fiscal 2009, the company expects to open about 50 stores and remodel 60 stores.
The Northeast region outperformed the company average for both the quarter and year-to-date periods.
- The southern regions, south central, southeast and southwest continued to struggle as sales in states most affected by housing.
- California, Nevada and Florida continued to be soft.
The management reported that the quarterly credit share was 44.6%.
- This represents an increase of approximately 270 basis points over the prior year quarter.
- Year-to-date, credit share increased about 250 basis points to 44.6% as well.
The second quarter gross margin rate firmed 68 basis points to 39.6%.
- Year-to-date, the margin increased 30 basis points to 38.2%.
- The increases reflect strong inventory management, lower clearance levels and higher penetration of both private and exclusive brands.
- The company expects gross margin to increase 10 basis points to 20 basis points over last year in Q3 and 20 points to 40 basis points in Q4.
The SG&A increased about 11% for the quarter.
- This was faster than sales but lower than expectations of about 12% to 13% over last year.
- Year-to-date, SG&A increased approximately 9%.
- The management expects SG&A expenses to increase 9% to 10% in the third quarter and 5% to 6% in the fourth quarter.
- The difference between the quarters is mainly due to having the 95 fall 2007 stores open for the entire third quarter versus one month last year.
