Kohl's 3rd-quarter profit rises

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NEW YORK -- Department store operator Kohl's Corp. said Thursday its third-quarter profit rose 20 percent, helped by strong demand for exclusive lines by Jennifer Lopez and Marc Anthony.

Kohl's, based in Menomonee Falls, Wis., raised its full-year outlook, and says it's counting on continued spending during the holiday period. Its shares jumped about 2 percent in trading.

Kohl's, like many department stores with moderately-priced merchandise, is facing challenges in getting its middle-income shoppers to spend. Kohl's results underscore a trend that's playing out in stores across the country in this down economy. Shoppers are focused on getting the cheapest prices on basics like tee shirts, but are willing to spend a premium to snag designer labels and other affordable luxuries.

Kohl's stepped up its marketing and deepened promotions on some basic items during the quarter, which drew deal-seeking shoppers. But customers were also lured into stores by the Jennifer Lopez and Marc Anthony collections, which hit stores in mid-September and feature such items as $69.99 platform shoes and $70 wool ponchos.

"We look at our customer, and she continues to be pressured by many of the things that you are well aware of in her life, and so she is very thoughtful," said Kevin Mansell, chairman, president and CEO, during a conference call with analysts following the earnings release.

Store-label products like the new collections by Jennifer Lopez and Marc Anthony can differentiate a department-store chain from competitors. They also translate into fatter profit margins. By sourcing and designing their own products, merchants can eliminate the extra costs associated with buying from branded suppliers.

During the three-month period, which ended Oct. 29, Mansell told investors that store label and exclusive brands accounted for 51 percent of total sales in the third quarter, up from 25 percent in 2004.

That helped prop up profits in the third quarter. Kohl's said net income rose to $211 million, or 80 cents per share, matching the expectations of analyst polled by FactSet. That's up from $176 million or 57 cents per share a year ago.

Revenue rose 4 percent to $4.38 billion from $4.22 billion last year, also roughly matching analysts' expectations.

Revenue in stores open at least one year -- a gauge of a retailer's health -- rose 2.1 percent. That's an improvement from the 1.6 percent increase the retailer had in the second quarter.

In the fourth-quarter, Kohl's expects net income of $1.93 to $2.04 per share. The company expects revenue to rise 4 percent to 6 percent to $6.28 billion to $6.4 billion. The company also projected that revenue at stores opened at least a year will rise between 2 percent to 4 percent for the fourth quarter. Analysts expect earnings of $1.96 per share on revenue of $6.3 billion.

For the full year, Kohl's now expects net income of $4.34 to $4.49 per share. Analysts expect $4.46 per share.

Shares rose $1.24 to $55.53 in trading.

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