Bedding a Leader in Kohl's Q1 Gains
Jerry Epperson -- Furniture Today, May 24, 2010
Home, including bedding, was a leading part of the convincing first-quarter sales and profit gains at Kohl's, the mid-tier retailer reported last week.
Kohl's reported net income for the quarter ended May 1, 2010 of $199 million, or 64 cents per diluted share, compared with $137 million, or 45 cents eps, in the same period one year ago. The dollar gain was 45.2%; the eps rise was 42.2%.
Net sales in Q1 were up 10.9% to $4.0 billion; comparable store sales increased 7.4%.
While expansion was achieved across all merchandise categories, Kohl's chairman, president and ceo Kevin Mansell pointed to the footwear and home divisions – which both registered double-digit comp gains – as strongest.
“All areas of home” were robust, Mansell said, “led by seasonal, electronics, and bedding.”
Mansell said the 8.8% increase in average transactions per store was the highest quarterly gain since 2002. Regionally, the West and Southeast led the company, although all regions saw growth. He added that marketing ideas that have proved their worth for the chain in California and the West have started to take hold now in Florida and the Southeast. The company's merchandising mix and marketing are becoming “more regionally relevant,” he said, with region-appropriate products being better highlighted in regional promotional events.
A new in-store marketing test of electronic sale signage will roll out to a 100-store plot by this fall, Mansell said, and is expected to be in all stores by holiday 2011. It is expected to improve customer satisfaction while reducing ad-set payroll hours, he noted.
Wes McDonald, cfo, said Kohl's in Q1 achieved “higher than expected e-commerce sales” and noted that the company had purchased a second e-commerce fulfillment center during the quarter.
Mansell said e-commerce sales year-over-year were up 50% in the quarter, to $128 million and “well ahead of our plan.”
The net profit of 64 cents eps was ahead of Kohl's initial (Feb. 25) guidance of 48 to 52 cents, and about in line with analysts' consensus. Looking ahead, Kohl's gave its initial Q2 guidance of 70 to 75 cents eps, rather less than most analysts had expected. The company raised its full year guidance from the initial projection of net eps of $3.40 to $3.63 to a still relatively cautious eps of $3.57 to $3.75.
For the full fiscal year, McDonald projected a net sales gain of 6.5% to 8%, a comp gain of 3.5% to 5%, gross margin improvement of 20 to 40 basis points, and a trimming of SG&A costs by 5% to 7%.
The $17.2 billion retailer opened nine stores in the first quarter, vs. 19 opened in Q1 2009. Kohl's plans 21 additional store openings for the balance of 2010; the retailer will remodel 85 units by year end. New units and remodels include what Mansell called a “dramatically redesigned home area” that lends more sales floor flexibility and ample space to the department.
|Qtr. 5/1 (millions)||2010||2009||%change|
|Oper Income (EBIT)||$351||$251||39.8|
|Per share (diluted)||$0.64||$0.45||42.2|
|Average gross margin||38.1%||37.6%||--|
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