Private-brand apparel retailer Kohl's
Perhaps management can take solace in knowing that J.C. Penney
At least the difficulties start and end at the top line. Total sales grew 1.5% on the strength of 123 more stores being open this year than last. But comparable-store sales slipped by 6.7% -- the third (and worst) quarter in a row of negative comps for the company.
Gross margin, meanwhile, held up surprisingly well. It fell just 10 basis points from last year, offering evidence that Kohl's has its inventory under control. Inventory management is crucial for retailers weathering consumer-spending downturns, and Kohl's seems to be aware of that. Its inventories ended the quarter at $2.9 million per store, down 9% year over year.
Expenses jumped to 29.3% of sales, up from 27.2% of sales last year, but that's not a surprise, considering the soft comp results. Although Kohl's doesn't report rent expense in quarterly earnings releases, you have to figure that the deleveraging of occupancy expense was the major expense culprit, given that depreciation alone rose 0.7 basis points as a percentage of sales.
Profits fell 27%, but share buybacks helped curtail the earnings drop to 23.4%, or $0.49 a share. That was $0.05 better than what analysts expected, but also more than double the 11.5% EPS drop the company posted during the fourth quarter.
The company issued guidance in line with analyst expectations. Comps are expected to fall 3%-5% for the year, and earnings are forecasted to slip for the balance of 2008, but at an increasingly slower rate as the year progresses.
Don't expect great things from Kohl's for a while. General-merchandise companies such as Wal-Mart
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