By  on February 25, 2005

NEW YORK — Higher sales and lower costs led Kohl’s Corp. to double-digit earnings gains for the fourth quarter and year-end periods.

For the three months ended Jan. 29, the Menomonee Falls, Wis.-based retailer said earnings jumped 32.7 percent to $324.9 million, or 94 cents a diluted share, compared with $244.8 million, or 71 cents, in the year-ago period.

A change in the company’s lease accounting practices, announced on Tuesday, had a negative impact on earnings by $2.3 million, or 1 cent a share.

Larry Montgomery, chairman and chief executive officer, said in a statement that better inventory management was a key earnings driver. “Our inventory levels have been appropriately managed, resulting in significantly lower clearance levels and the best gross margin performance in our history.”

Sales for the quarter rose 14.5 percent to $4.08 billion from $3.56 billion in the same period a year ago.

Cost of goods sold fell to 66.4 percent of sales, or $2.71 billion, compared with 69.1 percent of sales, or $2.46 billion, in the year-ago quarter.

“We have been very pleased with the initial spring selling in all apparel areas,” Kevin Mansell, president, said during the conference call. “Chaps was advertised in our tab for the first time in a Presidents’ Day sale and we believe it has a very strong presence in the store in both casual and dress that will help improve the men’s business.”

In a report previewing Kohl’s earnings, Sanford C. Bernstein & Co. analyst Emme Kozloff said the company finds itself at a difficult stage. “Ironically, Kohl’s lack of a national footprint is both a strength and a weakness at this point for the stock,” Kozloff wrote. “It signifies its substantial square footage opportunity going forward…but in the short term it means that an area like the Midwest will disproportionately impact overall top-line performance.”

Dana Cohen, a retail analyst with Banc of America Securities, wrote in her earnings preview note that Kohl’s will likely focus on improving its in-store experience in 2005. “We think this has been lacking historically as the company was an item-driven store,” she wrote. “However, as competitors have improved their fashion and outfit presentation, Kohl’s now looks tired.”Montgomery said in his statement that in 2005 the company’s focus is to create a fun and exciting shopping experience. “We will continue to drive market share gains through differentiation in our marketing in the coming year,” said Montgomery.

For the year, earnings jumped 25.7 percent to $730.4 million, or $2.12 a diluted share, from $580.9 million, or $1.69, in 2003. Sales rose 13.8 percent to $11.7 billion from $10.28 billion.

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