New units drive Kohl's profits higher

MENOMONEE FALLS, WI — Still building sales at a heady pace, all the while cutting costs and building margins, Kohl's Corp. put up a third-quarter profit of $133,400 million, up 29.9 percent from $175.8 million last year.

Outpacing most of its peers in the retail arena, Kohl's drove sales up by 21.8 percent, to $2.1 billion from $1.7 billion as it continued to open new doors across the country. The bottom-line barometer of same-stores rose by 5.9 percent.

Providing a lift to earnings, along with the sharply stronger sales, Kohl's kept cutting away at costs, reducing its overhead by 40 basis points, to 21.2 percent of sales from 21.6 percent a year ago.

At the same time, margins held relatively steady, inching up by 10 basis points, to 34.7 percent from 34.6 percent. Gross margin dollars improved by 22.4 percent, to $746.9 million from $610.4 million.

"We continue to increase market share in all regions, improve gross margin performance and reduce our SG&A expense rate," commented Larry Montgomery, ceo.

Unlike others retailers, Kohl's doesn't seem to be hedging its bets about business going forward, and keeps building inventory to keep pace with sales. Stockpiles rose by 22.1 percent, to $2.1 billion from $1.7 billion last year, running slightly ahead of the rate of sales growth, at 21.8 percent.

Undeterred by a soft economy and an anxious consumer, Kohl's is maintaining its rapid rate of expansion, and opened 37 new stores during the period, including 33 prototype stores and four small-market test stores. The new prototype stores included the retailer's entry into the Providence, RI, market with four stores.

Next year, Kohl's plans to open about 80 new stores, about 35 in the first quarter alone. During the opening quarter, Kohl's will move into the Southern California with 28 new stores. Later in the year, during the fall, Kohl's will open another 45 doors, including entries into the Phoenix and Las Vegas markets.