This is a summary of the fourth quarter earnings call as presented by Kohl''s (KSS) Corp. on February 26, 2009
Management
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President, Chief Executive Officer & Director: Kevin Mansell
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Chief Financial Officer & Executive Vice President: Wesley S. McDonald
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Chairman of the Board: R. Lawrence Montgomery
Key Investors Issues
- Full Year Free Cash Flow of $687 Million.
- Net income was $1.10 per diluted share.
- The Company ended the year with 1,004 stores in 48 states, compared with 929 stores in 47 states at the same time last year.
Full Year Highlights
- Total sales decreased .5% to $16.4 billion as comp sales decreased 6.9% driven by a 5.9% decrease in transactions per store.
- Average transaction value decreased 1% as a result of a 1.9% increase in average unit retail and a 2.9% decrease in units per transaction.
- Gross margin increased 44 basis points to 36.9%.
Fourth Quarter Highlights
Total sales were approximately $5.2 billion this year versus $5.5 billion last year a decrease of 4.6%.
- Comp sales decreased 9.1% driven by a 7.9% decrease in transactions per store.
- Average unit retail increased 3.2% but was offset by a 4.4% decrease in units per transaction resulting in a 1.2% decrease in average transaction value.
- The South Central and Southwest regions led the company for the quarter but underperformed the company average for the year.
The firm''s credit share was 44.4% for both the quarter and the year an increase of over 200 basis points in both periods.
- The gross margin rate for the quarter was 34.8% up 2 basis points from last year.
- The increases reflect continued inventory management, lower clearance levels and higher penetration of private and exclusive brands.
- Gross margin for fiscal 2009 and the first quarter is expected to be flat to up 10 basis points over last year.
SG&A increased 3.3% reflecting Kohl''s ongoing efforts to control costs in the current economic environment.
- SG&A increased more than sales but less than new store growth as fourth quarter growth and expenses was also lower than the 5% to 6% expectation.
- SG&A expenses should increase 3% to 4% for primarily due to new stores.
- Depreciation as a percentage of sales was 2.7% for the quarter and 3.3% for the year, reflecting an increase of approximately 44 basis points over the prior year quarter.
Pre-opening expenses were $4 million for the quarter $1 million lower than the prior year quarter.
- For the year pre-opening expenses decreased 31% to $42 million as a result of the decrease in the number of new stores opened in the current year.
- The firm opened 75 stores in 2008 compared to 112 stores in 2007.
- The increase over last year is primarily due to the requirement to expense step rent seven months prior to the opening of a new store for ground lease stores.
The mix of the 2009 new stores is much more heavily skewed towards ground leases than normal with the opening of the acquired Mervyns locations.
- Operating income declined from $684 million to $573 million this year.
- Net interest expense increased to $30 million compared to $23 million in the prior year quarter primarily due to reductions in interest earned on investments.
- This increase was primarily due to $1 billion in debt issued in September, 2007 as well as reductions in capitalized interest due to decreased capital spending in 2008.
Interest expense is expected to be approximately $125 million for fiscal 2009 and $33 million in the first quarter.
- Net income was $336 million compared to $412 million last year.
- EPS was $1.10 compared to $1.31 same quarter last year.
- Kohl currently operates 1,004 stores compared to 929 at this time last year.
- Gross square footage was 89 million at year end 2008 and 82.5 million at year end 2007 an increase of 7.8%.
