Kohl's sees 1Q profits grow 40%

Don Hogsett, May 20, 2002

Still racing ahead and outpacing virtually all of its peers as consumers continue to shun full-price retailers, Kohl's Corp. drove first-quarter profits up by more than 40 percent while pushing sales higher by more than a fourth.

Remarkably, in an era of constrained consumer spending, Kohl's has now driven profits up by more than 30 percent for nine consecutive fiscal quarters. The fast-track retail phenomenon parlayed stronger sales, lower costs and modestly improved margins into earnings growth of 42.0 percent, to $106.6 million from $75.1 million last year.

Sales advanced by 25.7 percent, to $1.9 billion from $1.5 billion last year, as the chain added more than $382 million to the top line, rolling out new stores at a rapid pace.

Helping to fuel improved earnings, in addition to the stronger sales, Kohl's reduced its operating costs by 70 basis points, or seven-tenths of a percentage point, to 22.0 percent from 22.0 percent the prior year. Average gross margin widened modestly, by 10 basis points, to 35.2 percent from 35.1 percent last year. Helped by ongoing cost-cutting and stronger sales and wider margins, operating profits jumped up by 38.9 percent, to $184.0 million from $132.5 million the prior year. That generated an impressive operating margin — operating profits as a percentage of sales — of 9.8 percent, up from 8.9 percent last year.

During the first quarter, Kohl's opened 38 new units, entering the Houston market with 12 stores; the Boston market with 13; and the Nashville market with four stores. Two new stores were added in Dallas; and one each in Rocky Point, Walkill and Brewster, NY; Clifton, NJ; Huntsville, AL; and Indianapolis. In the third quarter, Kohl's plans to open another 32 stores and has 80 on the drawing board for next year, with a push into the Los Angeles market planned for next spring.

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