Footfall improved at Kohl’s Corp.’s stores in the second quarter, but shoppers didn’t spend enough to boost the chain’s sales or profits.
“The traffic momentum that we saw in the combined March/April period accelerated in the second quarter,” said Kevin Mansell, chairman, chief executive officer and president. “Though transactions for the quarter were lower than last year, July transactions increased.”
Mansell also said the company’s “sequential sales trend” improved across all product categories and geographies.
Investors were initially encouraged by the momentum and pushed the stock higher, but sentiment soured as Wall Street showed signs of weakness and Kohl’s stock was down 6 percent to $39.37 in midday trading.
Kohl’s second-quarter profits slid 6 percent to $208 million, or $1.24 a diluted share, on a 0.9 percent dip in sales, to $4.14 billion. Comparable sales slipped 0.4 percent.
“Gross margin and SG&A expenses were consistent with our expectations and we are seeing benefits from our ongoing inventory initiatives and the early stages of our cost-saving initiative,” Mansell added.
On a conference call with analysts Thursday morning, the ceo said the year “is unfolding as we had hoped across almost all areas.”
“For the quarter in total, regular price sales actually increased while our much lower level of clearance inventory resulted in much lower clearance sales, which impacted our total sale results,” he said.
He said the active business saw a percentage increase in the mid-teens in both footwear and apparel, driven by the introduction of Under Armour and also strength from Nike and Adidas.
“We’ve gained significant market share in active apparel and footwear in the first half of the year and expect that to continue in the back half based on assortment improvements and our momentum,” Mansell said.
The company had thought Under Armour could boost its comp sales by 0.75 percent this year and so far the brand is exceeding that so far.
RBC Capital analyst Brian Tunick noted that the company had seen some “nice sequential improvement” but that there were still reason for caution.
“Although longer term we maintain our view that sustained comp improvements will remain elusive to Kohl’s and market share shifts will continue to impact store productivity, in the near term we are encouraged by the company’s efforts to stabilize earnings,” Tunick said.
“All in, we now have more confidence that Kohl’s could achieve its full-year guidance for comps flat to down 2 percent,” he said.
Shares of Kohl’s dropped 5.8 percent to $39.50 in trading Thursday.
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