Kohl’s Q3 Surprises, Beating Forecasts despite Profit Fall

In Reports, What's New, Industry News by Accessories Staff

Kohl'sMenomonee Falls—Kohl’s may have reported today that its third quarter profit fell 15% as a small sales increase was offset by lower operating margins. But the revenue and profit figures beat expectations.

For the quarter the department store posted net income of $120 million or 63 cents a share, lower than $142 million or 7 cents a share in the prior-year quarter.

During the quarter, the company completed its $1.1 billion debt refinancing when it settled $318 million of debt that had been called in the second quarter. In conjunction with the refinancing, the company incurred a debt extinguishment loss of $169 million, including $38 million which was recognized in the third quarter.

Excluding loss on extinguishment of debt, adjusted net income for the latest quarter was .75 cents a share, compared to 70 cents a share last year.

That was good enough to beat analysts estimate for 69 cents a share.

Net sales for the quarter rose 1.2% to $4.43 billion from $4.37 billion in the same quarter last year, beating analysts’ consensus estimate of $4.40 billion.

Warns about Warmer Weather Effects

Comparable store sales rose 1%, compared to a 1.8 percent decline last year.

“Our 1% increase in sales was driven by strong back-to-school and late October selling periods offset by a weak September,” Chief Executive Kevin Mansell said in a statement. Still, Kohl’s shares are down 30% in the year to date, while the S&P 500 has gained 0.8%.

Kohl’s third quarter report was greeted with optimism by analysts who have become concerned about full year retail sales following Macy’s Inc.’s downgrade of its forecast.

According to Neil Saunders, chief executive officer of retail research firm Conlumino, Kohl’s should benefit from its opening of five to ten smaller 35,000 square foot stores in underserved locations and stores selling Kohl’s proprietary brands, such as FILA.

Nevertheless, Kohl’s warned that warmer-than-usual weather could dent current-quarter results, but maintained that it would meet the low end of its $4.40 to $4.60 a share for its full year forecast.

Kohl’s reported a 5 percent rise in inventory units per store in the third quarter, despite placing fewer orders, due to the warm weather. The company said it aimed to bring inventory to 2-3 percent levels in the latest quarter.

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