News Feature | August 16, 2013

Kohl's Wary About Remainder Of 2013 As Profits Drop

Source: Retail Solutions Online
Sam Lewis

By Sam Lewis, associate editor
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Kohls Store

Higher expenses are cited for fall in profits

On Thursday, August 15, Kohl’s announced its second-quarter profits fell 3.5 percent as the department store cited higher expenses as the main cause. The retailer also offered caution regarding earnings projected in the third-quarter. These results come one day after Macy’s reported disappointment in quarterly results, leading to lowering its full-year earnings forecast.

For the quarter ending August 3, Kohl’s reported profits of $231 million, which was down from $240 million in the same quarter one year ago. On a per-share basis, earnings gained four cents, climbing to $1.04, while the number of outstanding shares saw a drop of just over seven percent. Kohl’s saw revenue rise two percent, up to $4.29 billion, with same-store sales gaining nearly one full percent. General, administrative, and selling expenses came up 2.6 percent with expenses tied to repayment of borrowed funds and depreciation rose 7.1 percent. These expenses were given blame for the fall in profit. The 2013 share earnings per share forecast also saw a drop. Once at $4.15 to $4.45, Kohl’s has lowered expectations to $4.15 to $4.35 per share for 2013.

Kohl’s investors will analyze these results, along with rival department store chains’ reports, for indications regarding back-to-school sales and the view for the remainder of the year. Back-to-school is the retail industry’s second biggest spending period, behind the holidays. The return to academia is closely monitored by retail analysts as it is often an indicator of how successful retailers will be during the winter and holiday shopping seasons.

Looking ahead, Kohl’s expects earnings per share of 83 to 92 cents, on sales growth of one to three percent. Polled analysts from Thomson Reuters expect 94 cents per share, on 1 percent growth for Kohl’s during quarter three. Analysts at Stern Agee expect Kohl’s to have a good third quarter noting that a cool summer will likely mean autumn conditions will arrive sooner than usual. Historically, cooler, wetter autumns have been a beneficial scenario for apparel retailers as these weather conditions fuel clothing sales.