No, it's not Be Cool, the upcoming sequel to the film Get Shorty, starring John Travolta and Uma Thurman -- but it's still a pretty good story, if a little repetitive at times.
It wouldn't be so bad to "be" Kohl's (NYSE:KSS), the high-performance department store retailer whose shares rose more than 5% Friday, following the company's announcement of fiscal Q4 (ended Jan. 29) financial results that should look familiar to investors in the Menomonee Falls, Wis.-based company.
Kohl's has a pretty good thing going. It's not that complicated, especially if you're a retailer: If you add stores and widen margins, you'll see some nifty results on the ol' income statement. That's just what Kohl's did in 2004. It opened 95 new stores, and that, along with slim same-store sales growth, helped revenues rise nearly 14% year-over-year. Improved purchasing and cost management helped widen margins, which in turn led to net income growth of better than 25%.
Phil Wohl covered Kohl's Q3 results just a few months ago, and the good times seem to be continuing. The company plans to add another 95 stores next year, and it seems to have plenty of room ahead for expansion. Just last year, it added several major markets across the country, including Memphis, Tenn., Portland, Maine, and San Diego.
Department stores may not be sexy, but they're hardly dead. Many of them have well-developed vendor relationships and prime real estate -- not to mention market share -- in markets big, medium, and small all over the United States. So while their same-store sales growth might not blow you out of the water, there's certainly the potential for solid, sustained profit growth at the hands of the right managers.
Heck, why else would Federated (NYSE:FD) and May (NYSE:MAY) get together in a $10 billion deal? Even long-unfashionable J.C. Penney (NYSE:JCP) may be showing signs of life, as Rich Duprey reported on Friday. In Kohl's case, the bar has been set high: It has more stores than May or Federated does, and it's probably smart to moderate its expansion plans. You can see some concern about the company's long-term growth potential (barring acquisition) in its shares' diminished market value in recent years, but you can also see the profit-minded wherewithal of its management in last year's results.
Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.
