Kohl’s Corp. nudged ahead of first-quarter expectations, posting a 45.3 percent rise in profits as e-commerce and women’s sportswear turned in standout performances.
But investors were disappointed with the retailer’s second-quarter profit projection, which was less than what Wall Street analysts expected, and pushed its stock down 5.8 percent.
Net income at the Menomonee Falls, Wis.-based retailer rose to $199 million, or 64 cents a diluted share, from $137 million, or 45 cents, a year earlier. Earnings topped Wall Street estimates by 2 cents a share. Sales for the quarter ended May 1 climbed 10.9 percent to $4.04 billion from $3.64 billion. Comparable-store sales increased 7.4 percent.
Kevin Mansell, chairman, president and chief executive officer, told analysts on a conference call that all of the company’s businesses recorded higher comps in the quarter, with women’s turning in the top overall performance and gains of 20 percent or more in the Dana Buchman, Elle, Fila Sport and Simply Vera Vera Wang exclusive brands.
“We are off to a very good start,” Mansell said. “We have gained significant market share nationwide. Success has been spread across merchandise areas in regions, with each area of business and each region achieving at least a midsingle-digit comp.”
E-commerce revenues jumped 50 percent to about $128 million in the quarter.
“We continue to see the type of growth in this area that supports our decision to make major new investments in capital and infrastructure in our e-commerce business,” Mansell said.
Although Kohl’s boosted its full-year profit projections to $3.57 to $3.75 a diluted share from $3.40 from $3.63, its second-quarter outlook landed with a thud. The retailer set the earnings bar for current quarter at between 70 cents and 75 cents a diluted share, compared with the 88 cents Wall Street expected. The stock responded by falling $3.34 to $53.81.
However, Kohl’s has a reputation for exceeding its own projections.
“Looking back over the past 18 months, it’s generally been a good idea to buy Kohl’s on weakness after it issues conservative guidance — we expect today’s stock action to create a similar opportunity,” J.P. Morgan analyst Charles Grom said in a research note.
“We remain confident [Kohl’s] will be a market share gainer this year,” said Grom, who rates the stocks “overweight” with a price target of $63.
The firm remodeled 17 stores and opened nine new outposts during the quarter, ending with 1,067 doors. Kohl’s was one of the few retailers to expand its footprint through the recession and the company plans to keep growing. Another 68 stores are slated to be remodeled and 21 new doors are expected to open over the balance of this year.
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