Kohl's August Sales Rise - Analyst Blog

Departmental store operator Kohl's Corporation (KSS) reported a 4.5% hike in its comparable-store sales for the four-week month ended August 29, 2010, ahead of Street expectations of 2.6%.  Total revenue for the month rose 7.7% to $1.42 billion as compared with $1.32 billion in the year-ago period. The company expects the positive trend to continue for the rest of the year.
 
The robust performance in August was mainly driven by positive same store results experienced at all regions and lines of businesses. The Southeast was the best performing region and home business, men's products and footwear were the best sellers.
 
Year to date, Kohl’s comparable-store sales jumped 5.7% and total sales increased 9.0% to $9.55 billion, on an annualized basis.

In August, Kohl’s peer group also witnessed impressive comparable-stores sales results. Nordstrom Inc. (JWN), Macy’s Inc. (M) and J.C.Penney Company Inc. (JCP) recorded a respective 6.3%, 4.3% and 2.3% increase in comparable-stores sales results for the reported month.

Kohl’s, the operator of 1,067 stores in 49 states, expects comparable-store sales to increase in the range of 2% to 4% in both the third and fourth quarters of 2010. The company forecasts annual sales growth in the range of 4.5% to 6.5% for the last two quarters of fiscal 2010.

Kohl's has projected earnings per share in the range of 57 to 63 cents for the third quarter and $3.57 to $3.70 for fiscal 2010. However, the company’s guidance is below the current Zacks Consensus Estimate of 62 cents and $3.68 per share for the third quarter and the full year, respectively.
 
Headquartered in Menomonee Falls, Wisconsin, Kohl’s continues to meet and exceed high expectations with impressive execution throughout its operations. Moreover, the company’s pricing strategy and overall profitability culture are focused on maintaining a low-cost structure. We expect strong traffic and market share gains to drive earnings growth in the near future.

However, the majority of its sales and income are typically realized during the second half of each fiscal year. Hence, we remain cautious about the company’s business that is subject to seasonal influences. Thus, we maintain our Neutral recommendation for the stock.

 
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