Menomonee Falls-based Kohl’s Corp., which operates the Kohl’s department stores, today reported an 8 percent profit increase in its second quarter, beating analyst expectations.
Net income was $140 million, or 77 cents per diluted share, up from $130 million, or 66 cents per share, in the second quarter of 2015. Adjusted earnings per share, excluding ongoing restructuring costs, were $1.22 per share, 19 cents higher than analysts’ predictions.
Operating income totaled $302 million, down from $424 million in the same period a year ago, driven by $128 million in store closing and corporate restructuring costs in the most recent quarter. Selling, general and administrative expenses were down 2 percent.
Most of the store closing costs, $119 million, went to real estate lease obligations, which the company hopes to sublease or renegotiate, Mansell said.
“Assuming worst case scenario that we are unable to terminate any other leases before their maturity, the $119 million will be paid out over the next 13 years,” he said.
Revenue was $4.2 billion in the second quarter, down 2 percent from $4.3 billion in the same period last year, but $20 million higher than analyst expectations. Comparable store sales, an important measure of retail success, were down 1.8 percent, compared to a 0.1 percent increase in the year-ago quarter.
“Our sales improved over our first quarter results, but were below our expectations,” said Kevin Mansell, chairman, president and chief executive officer of Kohl’s. “We are encouraged by the performance of juniors and young men’s as we enter the back-to-school season. Our inventory management initiatives helped us to achieve a strong increase in gross margin, with ending inventory per store down significantly from last year. Our associates throughout the organization continue to effectively manage expenses in response to changing sales trends and I appreciate all of their efforts.”
Kohl’s operates 1,150 stores, 12 FILA Outlet stores and three Off/Aisle clearance centers in 29 states. In the second quarter of 2015, it was operating 1,164 stores.
The company has seen success with its active and wellness category. It opened the FILA stores during the quarter, and also partnered with Under Armour to offer its products in early 2017.
“The active and wellness category itself is now 18 percent of our total business,” Mansell said. “We’ve already established a strong leadership position in the active and wellness area, and adding one of the most sought-after brands to our portfolio of offerings will allow us to project that leadership even more fully.”