Kohl’s Corp. registered gross margin improvement despite declines in profits and sales in the fourth quarter.

This story first appeared in the February 28, 2014 issue of WWD. Subscribe Today.

In the 13 weeks ended Feb. 1, the Menomonee Falls, Wis.-based midtier department store registered net income of $334 million, or $1.56 a diluted share, down 11.6 percent from the $378 million, or $1.66, logged in the final quarter of 2012. Kohl’s had projected earnings per share of $1.53 in updated guidance, and analysts, on average, expected EPS of $1.54.

Revenues declined 3.8 percent to $6.1 billion from $6.34 billion in the prior-year period. Comparable sales were down 2 percent, in line with earlier company comments. Gross margin rose to 34 percent of sales in the fourth quarter from 33.3 percent in the 2012 period.

Despite difficulties in its fulfillment centers and increased shipping costs tied to its e-commerce business, e-commerce sales increased 16 percent in the quarter, finishing the year with revenues of $1.7 billion, or about 8.9 percent of annual sales.

Kevin Mansell, chairman, president and ceo of Kohl’s, noted, “Our e-commerce sales have now almost doubled since 2011 and have increased at a compounded annual growth rate of almost 40 percent over the last five years.”

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Mansell said Kohl’s inventory levels and assortment are “well positioned” as the firm makes the transition to the spring selling season. Inventory per store is down 4 percent on a unit basis, he added.

In initial 2014 guidance, Kohl’s said it expects EPS of between $4.05 and $4.45 on a comp performance that is flat to ahead 2 percent. Wesley McDonald, chief financial officer, said that, with the arrival of Juicy Couture for women and Izod for men in the fall, “we would expect fall to be a little bit better than spring.”

For the year just completed, net income dropped 9.8 percent to $889 million, or $4.05 a diluted share, while revenues declined 1.3 percent to $19.03 billion.

Shares of Kohl’s rallied 2.4 percent to close at $55.74 in New York Stock Exchange trading Thursday.

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