Kohl’s Corp. continues to struggle

Retailer focuses on inventory reduction, athletic apparel

Kohl's store
A Kohl's store.

Menomonee Falls-based Kohl’s Corp. continues to struggle to turn a profit in a shifting marketplace.

Kohl's store
A Kohl’s store.

The national retailer reported net income of $252 million, or $1.44 per diluted share, down from $296 million, or $1.58 per share, in the fourth quarter of 2015.

Operating income was $473 million, down from $541 million in the fourth quarter of 2015. Selling, general and administrative expenses were up 2 percent from the same quarter the previous year.

Fourth-quarter revenue totaled $6.2 billion, down 2.8 percent from $6.4 billion in the same period a year ago. Comparable store sales, an important measure of retail performance, were down 2.2 percent year-over-year.

For the full year, Kohl’s reported net income of $556 million, or $3.11 per diluted share, down from $673 million, or $3.46 per share, in 2015.

Full-year operating income was $1.2 billion, down from $1.6 billion in the same period a year ago.

And 2016 revenue totaled $18.7 billion, down 2.7 percent from $19.2 billion in the prior year. Comparable store sales were down 2.4 percent from 2015 to 2016.

“Sales results were weak for the quarter in total, driven by declines in brick and mortar traffic, and offset somewhat by strength in online demand,” said Kevin Mansell, chairman, chief executive officer and president, in a call with analysts.

During 2016, Kohl’s closed 19 department stores, which it said played out with about one-third of the sales from the closed stores shifting to nearby stores. At the same time, it opened nine new small-format stores, 12 FILA outlets and two Off/Aisle stores. The company now operates about 1,100 stores in 49 states.

Like many retailers, Kohl’s has been struggling to attract customers to its stores as they shift their shopping online. It has been taking steps to counteract the trend by leasing space in its stores to other retailers, particularly in sports apparel, and increasing its web presence. The company plans to spend about $350 million on IT in 2017.

Kohl’s also has been decreasing inventory at its stores to cut costs. It reduced inventory per store by about 5 percent in the fourth quarter, which improved merchandise margin, in-store and logistics expenses for material handling and free cash flow.

“From a strength perspective, we made great progress last year on the management of our inventory levels and expenses across the company,” Mansell said.

Kohl’s plans to continue reducing inventory by about 3 percent per year through 2019.

“In 2017, we will accelerate our focus on becoming the destination for active and wellness with the (addition of) Under Armour (products) in early March. We will also extend our efforts on improving our speed to market across all of our proprietary brands into all apparel areas and home,” Mansell said.

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Molly Dill, former BizTimes Milwaukee managing editor.

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