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Kohl's Profit Falls On Deep Discounts; Current Quarter Outlook Disappoints

Kohl's Profit Falls On Deep Discounts; Current Quarter Outlook Disappoints
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5/10/2012 8:07 AM ET

Kohl's says its first quarter profit declined, as the department store slashed prices in hopes of luring customers. The company offered a gloomy outlook for the current quarter, but continues to see full year earnings above market estimates. The shares were down 4 percent in pre-market activity.

For its first quarter, Kohl's net income declined to $154 million or $0.63 per share from $201 million or $0.69 per share last year. On average, 20 analysts polled by Thomson Reuters expected earnings of $0.61 per share for the quarter. Analysts' estimates typically exclude one-time items.

Net sales increased 1.9 percent to $4.24 billion from $4.16 billion a year before, while analysts were looking for revenues of $4.25 billion. Comparable-store sales for the quarter edged up 0.2 percent.

Gross margin was 35.9 percent for the quarter, lower than prior year's 38.1 percent. Operating margin also declined from last year.

Chief Executive Officer Kevin Mansell said, "Our first quarter results reflect the implementation of our strategy to initiate lower pricing in order to provide greater value to our customers. This planned action led to significantly lower gross margins for the quarter. Strong management of expenses allowed us to achieve our earnings goal for the quarter."

The Company ended the quarter with 1,134 stores in 49 states, compared with 1,097 stores at the same time last year.

Peer Macy's Inc. (M) on Wednesday reported a 38 percent increase in profit for the first quarter, reflecting higher comparable store sales and a surge in online sales. The company reiterated its full-year earnings outlook, which was lower than analysts' then estimate.

On Wednesday, Kohl's Board of Directors declared a quarterly dividend of $0.32 per share, payable June 27 to shareholders of record at the close of business on June 6.

Looking ahead for the second quarter, Kohl's expects earnings between $0.96 and $1.02 per share, sharply lower than the $1.13 per share estimated by the Wall Street analysts. The guidance is based on total sales growth of 2 to 3 percent and comparable store sales growth of flat to 1 percent and includes expected second quarter share repurchases of $250 million.

Mansell added, "We have accelerated new receipts into second quarter to ensure we are well-positioned from an inventory perspective for the Back-to-School season. The combination of these two actions should allow us to greatly improve our sales for the fall season."

Further, for fiscal 2012, the company still sees earnings of $4.75 per share, while analysts project full-year earnings of $4.74 per share.

In pre-market activity, Kohl's shares are currently trading at $49.03, down $1.83 or 3.60 percent.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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