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Kohl’s putting home in the spotlight

Menomonee Falls, Wis. – The home category is taking the spotlight at new and remodeled stores in 2010 at Kohl’s, as the company is adding a revamped department to new and improved-on units over the coming months.

During the mid-tier department store’s fourth quarter and yearend conference call this morning, chairman, president and ceo Kevin Mansell described the new home department as “dramatically redesigned” and “completely new.”

“[It] will allow us to have more capacity on the sales floor and will provide more flexibility with our fixtures,” he continued.

The new home area will be included in the 30 new stores and 85 existing units targeted for remodeling this year.

The home category at Kohl’s proved a positive business over the fourth quarter and fiscal year. It performed in line with the company for the quarter and outperformed the company for the full year.

Additionally, Kohl’s reported “consistent improvement in our three major private brands – Croft & Barrow, Sonoma and Apt. 9,” the latter two of which include home and decorative accessories in their assortment, Mansell noted. “All three achieved double-digit positive comps for the quarter and positive comps for year.”

Home was just one positive aspect in Kohl’s numbers for the quarter and the year – both of which in favorable ended with favorable results.

For the fourth quarter, ended Jan. 30, sales increased 8.5% to $5.7 billion versus $5.23 billion last year, and comparable store sales rose 4.5%. Net income for the period also increased, but more robustly, by 28% to $431 million, or $1.40 per diluted share, compared to $336 million, or $1.10 per diluted share, a year ago.

For the year, sales rose 4.8% to $17.2 billion, and comps also increased, albeit modestly, by 0.4% over the prior year. Net income was $991 million, or $3.23 per diluted share, representing a 5.8% increased compared to the prior year’s $885 million, or $2.89 per diluted share.

"We are pleased that we were able to gain market share in a difficult environment, achieving both total and comparable store sales increases for the year,” Mansell said. “We improved our merchandise margins significantly through strong inventory management and successful private and exclusive brand strategies. Expenses were well managed while improving the store experience for our customers.”

Aside from home, e-commerce is another area there Kohl’s is looking to build this year. Total ecommerce revenues increased 38% to almost $500 million in 2009, following a 48% increase in 2008.

 “We are making a major new investment with capital and infrastructure in our ecommerce business to fuel future growth,” Mansell said. “Based on our research, testing, and our own results, it appears that our opportunity in this business is substantially larger than we originally envisioned.”

And real estate expansion is still another focal point for 2010 when Kohl’s plans to open about 30 new stores – nine in the spring and 21 in the fall – and remodel as many as 85 existing units. 

Kohl’s will work on the remodels in March, May and August, and the company has reduced the construction time frame per project to nine weeks from a 16 weeks.

Kohl’s currently operates 1,058 stores in 49 states.

Looking ahead, the company offered initial guidance for fiscal 2010. Based on assumptions of a total sales increase of 4% to 6% and a comparable store sales increase of 1% to 3% for both the quarter and year, Kohl’s expects earnings per diluted share of $0.48 to $0.52 for the first quarter of 2010 and $3.40 to $3.63 for the year.

"Consumers continue to be financially strained and are looking for value and ways to make their dollars go further. As a result, we are planning conservatively in our sales expectations, inventory levels and expenses,” Mansell said. “We will be very competitive in order to continue to gain market share. We are focused on the future as we invest prudently in stores - both new and remodeled - and our high-growth e-commerce business, technology and talent to ensure our profitable growth in the long run."

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