Kohl's earnings outpace openings

Don Hogsett, March 11, 2002

MENOMONEE FALLS, WI — Steadily raising the bar and creating new performance benchmarks as price-conscious consumers flock to low-price retailers, Kohl's Corp. drove its fourth-quarter profits up by 31.0 percent, to $233.8 million from $178.5 million last year.

Remarkably, in a particularly tricky retail environment, the rocket-hot retailer managed to push its earnings up substantially faster than its sales as it opened stores, cut costs and held its margins steady in a mostly promotional environment for other big retailers.

In an unusually strong performance, which put Kohl's at or near the pinnacle in terms of performance benchmarks, the retailer generated a return on sales — profits as a percentage of sales — of 8.6 percent during the closing quarter, up from 8.0 percent a year ago. That means that Kohl's managed to squeeze out $.08 in profit out of every dollar of sales.

Driven by new-store openings, sales at Kohl's grew by 22.5 percent, to $2.7 billion from $2.2 billion last year, as the retailer layered on more than half a billion dollars to its top line during the crucial Christmas quarter. But Kohl's didn't have to rely on new stores alone to drive the profit engine, as same-store sales skyrocketed up by 10.1 percent during the closing quarter, a remarkable performance in the best of times, and exceptional in today's price-driven, ferociously competitive environment.

Supporting the bottom-line growth, Kohl's whittled down its costs by 90 basis points, to 17.0 percent from 17.9 percent the prior year. And while most other retailers had to hack away at prices to move the goods, depressing margins and profits, Kohl's held its margins steady at 32.9 percent.

In another prop to the bottom line, inventories remained well controlled and grew beneath the rate of sales, moving up by 19.4 percent, compared with the 22.5 percent increase in sales.

Laying the foundation for further sales and earnings growth, Kohl's opened 62 new stores last year, entering the Atlanta, Oklahoma City and Austin, TX, markets. At the same time it opened two new distribution centers to support expansion in northeastern and southern central markets, and selected a site for a new California distribution center to support the chain's entry next year into the Southwestern market.

Kohl's Corp.

Qtr. 2/2/02 (x000) 2002 2001 % change
Sales $2,724,225 $2,223,041 22.5
Oper. income (EBIT) 389,281 300,815 29.4
Net income 233,823 178,494 31.0
Per share (diluted) 0.68 0.52 30.8
Average gross margin 32.9% 32.9%
SG&A expenses 17.0% 17.9%
12 months
Sales 7,488,654 6,151,996 21.7
Oper. income (EBIT) 849,975 651,315 30.5
Net income 495,676 372,148 33.2
Per share (diluted) 1.45 1.10 31.8
Average gross margin 34.3% 34.1%
SG&A expenses 20.4% 20.8%

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