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Kohl’s Corp. is going more exclusive, more online and into smaller stores.
This story first appeared in the November 11, 2011 issue of WWD. Subscribe Today.
The Menomonee Falls, Wis.-based chain boosted third-quarter profits by 19.9 percent and upped its guidance for the year, noting that 51 percent of its sales for the quarter were from private and exclusive brands, that it’s on track to hit $1 billion in online sales this year and that most of its new stores this year and next would feature a smaller format.
Profits rose to $211 million, or 80 cents a share, from $176 million, or 57 cents, a year earlier. Earnings came in 1 cent ahead of Wall Street’s consensus projection. Sales for the three months ended Oct. 31 rose 3.7 percent to $4.38 billion from $4.22 billion, with comparable-store sales up 2.1 percent.
Rising commodity prices helped push Kohl’s apparel costs up 10 to 15 percent for fall, ratcheting average unit retail prices up 9.5 percent, although a more modest unit-per-transaction decline lead to an overall 5.2 percent rise in average transaction value.
“We weren’t happy with our sales performance in the third quarter in total, but we definitely like the improvement that came in September and October,” said Kevin Mansell, chairman, president and chief executive officer, on a conference call with analysts. “We’re pleased to have achieved our earnings goals as all areas of the company contributed to the success. We have strengthened our marketing for the fourth quarter, adding approximately $30 million to our spending and have the benefit of the biggest brand launches in our company’s history, which we believe will allow us to continue to improve our sales performance in the fourth quarter.”
In mid-September, the retailer introduced its Jennifer Lopez and Marc Anthony brands. The company also plans to have new offerings for the back-to-school and fall season next year. As recently as 2004, exclusives accounted for only 25 percent of the retailer’s sales.
Kohls.com has also been updated to feature what’s new, best sellers and items shoppers rate highly. The company’s putting more money into digital media marketing to reach more targeted audiences and opened its third e-commerce fulfillment center to support the peak holiday season.
But even with the company’s Web business approaching the 10-digit mark, Kohl’s is still largely a brick-and-mortar retailer, although its new stores are smaller, reflecting broader trends as retailers move to smaller boxes. About three quarters of the 40 stores Kohl’s opened this year feature its more-compact format with fewer than 64,000 square feet of retail space. And 90 percent of the 30 stores slated to open next year will be on the smaller side. As of this summer, Kohl’s stores had an average of about 74,000 square feet of selling space.
Kohl’s raised its profit outlook for the year to a range of $4.41 to $4.52 a share from $4.34 to $4.49. Analysts already had the company pegged for earnings of $4.44.
Shares of the firm closed up 2 percent to $55.36 on Thursday.