NEW YORK — Apparel felt the sting of lower same-store sales as Kohl’s Corp. weathered “disappointing” first-quarter earnings growth during what chief executive officer Lawrence Montgomery bemoaned the “toughest quarter in the company’s history.”
Women’s, men’s and children’s apparel each experienced a 3 percent decline in comparable-store sales during the quarter, although accessories led merchandise categories with a comp advance of an equal amount, Kevin Mansell, president, said on a conference call with analysts.
For the three months ended May 3, the Menomonee Falls, Wisc.-based department store chain said net income increased 4.1 percent to $111 million, or 32 cents a diluted share. That compares with last year’s earnings of $106.6 million, or 31 cents. Earnings per share matched the Wall Street consensus estimate. Last week, Kohl’s cautioned that its earnings would come in below analysts’ forecasts and would fail to meet its own guidance of 36 to 40 cents. The firm matched its revised guidance.
Sales for the period climbed 13.2 percent to $2.12 billion from $1.87 billion a year ago, as same-store sales dropped 2.4 percent. By month, February comps fell 4.6 percent, March inched up 0.4 percent and April same-store sales dropped 4.1 percent.
“Obviously, we are very disappointed with the overall results for the quarter but we are pleased with the liquidation of clearance,” Mansell said on the call. “We had, as you know, a very late start on the sale of spring apparel, and as more normal temperatures arrived in the country, we have seen the customer respond.”
After identifying the Southwest and South Central U.S. as the best regions during the quarter and the West and Northeast as the “most difficult,” he singled out juniors for its strong performance within women’s wear.
Underscoring the difficulties of the quarter, he added, “I am also pleased to say that in partnership with our vendors, we have been very aggressive in clearing our goods.”
A firm with little experience at anything other than expansion and growth, Kohl’s costs rose incrementally throughout its operations, which helped account for sales outpacing earnings. Gross margin as a percentage of sales nicked down to 35 percent from 35.1 percent in the prior-year period, as merchandise costs rose to 65 percent from 64.9 percent. Selling, general and administrative costs equaled 22.4 percent of sales, up from 22 percent, and depreciation and amortization costs increased 20 basis points to 2.6 percent from 2.4 percent a year ago. Preopening expense, however, fell to 0.7 percent of sales from 0.9 percent.All those small costs added up to a 6.6 percent decline in operating income to $196.2 million from $184 million a year ago. Further depleting the bottom line was a 40.8 percent rise in interest expense to $17.8 million from $12.6 million a year ago. As a percentage of sales, interest expense increased 30 basis points to 0.9 percent from 0.6 percent.
Taken as a whole, profits before income taxes grew 4.1 percent to $178.5 million from $171.4 million a year ago, but as a percentage of sales they dipped 80 basis points to 8.4 percent.
During the quarter Kohl’s opened 35 new stores, and entered the new markets of Los Angeles with 28 stores and San Antonio with 3 stores. In the third quarter, the firm said it plans to open about 45 stores, including in Phoenix and Las Vegas.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty