Kohl’s net income rises on better revenue; company trims top end of yearly outlook

Kohl’s 2Q net income rises, but outlook less rosy

NEW YORK — Kohl’s Corp. second-quarter net income rose nearly 14 percent as the moderate-price department store chain continued to draw more shoppers from rivals for its exclusive fashions, but job worries are making customers spend less per visit.

Kohl’s trimmed the top end of its yearly outlook because of spending to improve its e-commerce business and expectations for slowing sales growth in the second half of the year amid an uncertain economy. Shares fell $1.28, or 2.7 percent, to $46.50 on the tepid outlook.

For Kohl’s middle-class customers, “the biggest challenge is jobs,” said CEO Kevin Mansell in an interview with The Associated Press following a conference call with investors Thursday. Even if they’re employed, “they’re worried about continued employment and they’re saving more,” he added. That’s not leaving much room in their budget to buy what Kohl’s sells, he added.

Kohl’s said its net income rose to percent $260 million, or 84 cents per share. That compares with $229 million, or 75 cents per share, last year. Analysts expected 82 cents per share.

The company now expects yearly net income of $3.57 to $3.70 per share. Earlier guidance was $3.57 to $3.75 per share. Analysts surveyed by Thomson Reuters expect $3.76 per share

Revenue rose 8 percent to $4.1 billion in the second quarter. That nearly matched analysts expectations.

Revenue in stores open at least a year rose 5.9 percent. Kohl’s e-commerce division enjoyed a 50 percent increase in total revenue for the second quarter and year to date. Such robust e-commerce growth contributed 1 percentage points to its revenue at stores opened at least a year, considered a key indicator of a retailer’s health.

What’s helped boost profits is Kohl’s tight lid on inventory as well as its bolstered store-label fashion offering, which now accounts for 49.1 percent of its business. That’s up 3 percentage points from a year ago. Among its exclusive fashions, Simply Vera Vera Wang and its Elle brand reported total revenue increases of more than 30 percent. Elle is expanding beyond clothing and accessories into home products under the label Elle Decor this fall.

Mansell told investors during a call that so far this year Kohl’s has seen an increase of more than 8 percent in the number of transactions per store, helped by aggressive marketing of its fashions.

Still, Mansell believes that the back-to-school shopping season will be late as shoppers buy closer to when they need the items. Kohl’s expects August’s revenue at stores opened at least a year to be below its forecast for the quarter, while September should be in line, and October’s business better.

For the third quarter, Kohl’s expects total sales to increase between 4.5 percent and 6.5 percent and revenue at stores opened at least a year to rise 2 percent to 4 percent. It also expects selling, general and administrative expenses to increase between 10 and 11 percent. This would result in earnings per share of 57 cents to 63 cents for the third quarter.

Among the big costs Kohl’s is incurring is for its new million-square-foot distribution center in California for its e-commerce business.

For the fourth quarter, Kohl’s expects total sales to increase between 4.5 and 6.5 percent, and revenue at stores opened at least a year to rise 2 percent to 4 percent. This would result in earnings per share of $1.51 to $1.59 per share.

For the full year, Kohl’s expects earnings of $3.57 to $3.70 per share. Analysts surveyed by Thomson Reuters expects 74 cents per share in the third quarter and $1.57 per share in the fourth quarter.

Kohl’s also announced that it’s switching the bank running its store-label credit-card business to Capital One N.A. from Chase Bank USA, according to a regulatory filing Thursday.