Soft Home Bleak at Kohl's

Menomonee Falls, Wis. — In a weak overall home business at Kohl's Corp. during the second quarter, soft home performed so poorly that expectations for the category through yearend are bleak, the company reported during its earnings release last week.

"Soft home was definitely significantly worse than the rest of the store and was significantly worse than home, which underperformed the store to begin with," said president Kevin Mansell during the company's quarterly conference call. "It's definitely a category that is probably going to be difficult throughout the fall."

That's not to say Kohl's is giving up on home textiles. The 957-unit mid-tier department store chain is in the process of "making changes" to resuscitate the category.

"We're looking harder at value in there for sure. Some of those categories are very basic categories. New bath towel purchases or new sheet purchases or bedding purchases aren't going to be heavily driven by strong value offer," he said. "Secondarily, we're looking at applying more of our brand ideas that have been successful elsewhere to a larger part of the soft home business."

While home was not alone at the bottom during the second quarter and year to date, when "all lines of business and all regions reported a decrease in comp sales," Mansell said — a bright spot for Kohl's in the period was its roster of exclusive brand offerings.

For example, the recent expansion of the Food Network platform to include celebrity chef Bobby Flay "has helped food prep outperform the rest of home."

In addition, Simply Vera Vera Wang as well as Kohl's other fall 2007 brand launches, he added, "also continue to perform extremely well with both our existing and new customers and outperformed their plan for the quarter and year to date."

Profit for the quarter ended Aug. 2 fell 12.3% to $236 million, or 77 center per share – beating Wall Street's expectation of 73 cents per share. Sales rose 3.8% to $3.7 billion, while comps fell 4.6%.

Kohl's plans to open 46 stores in October and one in November during the third quarter. The new units include Kohl's 1,000th store and seven locations in the Miami/Ft. Laurderdale/West Palm Beach market.

For 2009, Kohl's expects to open approximately 50 stores — 20 in the spring and 30 in the fall. Additionally, 60 stores will be remodeled during the first half of the year — an increase from 36 such sites in 2008.

After that, the new-store opening schedule is undetermined. Kohl's has identified about 1,300 potential markets, said Larry Montgomery, chairman and ceo. "But in the current environment we are uncertain about the timeline for future store openings beyond 2009."