By  on August 9, 2012

It’s crunch time for Kohl’s Corp.

Kevin Mansell, chairman, president and chief executive officer, said the retailer — which is in the midst of a rough patch and logged a 19.7 percent drop in second-quarter profits Thursday — is getting back on track.

“We enter the fall season with improved understanding of how our customer responds to our pricing, fresh inventory and normalized inventory levels,” Mansell told analysts on a conference call.

Kohl’s was hurt earlier this year when it didn’t have enough inventory in the stores and has taken a new tack, entering the second half with units per store up about 6 percent from a year ago.

“We lowered our merchandise margin plans to allow our merchants to take a more leadership position of price points in all of our key businesses,” Mansell said. “This is especially important for us in order to expand the appeal of Kohl’s value to a broader customer base. Our customers have responded favorably to the lower prices, particularly in opening price points.”

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Mansell has previously acknowledged that the company lost some of its pricing leadership last year and that it failed to produce “consistent excitement” in the merchandise and to craft marketing that cut through the promotional din.

Kohl’s stock slipped 1.2 percent to $51.42 Thursday and Wall Street will be watching the company very closely this fall.

“If [same-store sales] can rebound in the low-single digit range and inventory levels can be well managed, we think the stock can move into the high $50s,” said Charles Grom, Deutsche Bank analyst. “Conversely, if [Kohl’s] has miscalculated the root of its comp softness over the past year — i.e. maybe its product or promotional intensity — the stock could move to the $40 level.”

Erika Maschmeyer, analyst Robert W. Baird & Co., is bullish on the stock and expects second-half improvement from Kohl’s, but said, “We will be closely watching back-to-school results, as our thesis has centered on the inventory build supporting market share gains beginning in August.”

Matthew Boss, J.P. Morgan analyst, said there were “structural questions still not answered” such as the company’s maturing store base and competition from the off-price sector.

Kohl’s second-quarter profits fell to $240 million, or $1 a share, from $299 million, or $1.08, a year earlier. Despite the drop, earnings per share came in 4 cents ahead of the 96 cents analysts projected.

Sales for the three months ended July 28 slipped 1 percent to $4.21 billion from $4.25 billion. Mansell described the sales as “disappointing.”

Comparable-store sales fell 2.7 percent, with men’s, silver jewelry and handbags all comping up. E-commerce sales jumped 39 percent to $237 in the quarter.

The 1,134-door chain now expects 2012 EPS of $4.50 to $4.65, down from the $4.75 previously projected. Analysts had already been thinking along those lines and pegged earnings for this year at $4.64.

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