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Kohl's profit up nearly 20% in 4Q

Don Hogsett -- Home Textiles Today, March 10, 2003

Opening new doors and building sales at a rapid clip, and at the same time modestly whittling down its overhead, Kohl's Corp. drove fourth-quarter profits up by 19.3 percent, to $279.0 million from $233.8 million last year.

But working through a punishing retail environment that's leaving no one untouched, the rate of earnings growth has slowed substantially, and fell behind the even higher gain of almost 30 percent recorded for the entire fiscal year.

Sales during the all-important Christmas quarter grew by 16.9 percent, to $3.2 billion from $2.7 billion. But once again, the rate of growth had slowed in the midst of stalled-out consumer spending and economic uncertainty. For the entire year, by contrast, sales had grown at the faster pace of 21.8 percent. Crucially, same-store sales had slowed substantially, edging up just 1.2 percent, compared with the sharply higher growth rate of 5.3 percent for all of last year.

Providing a modest lift to the bottom line, in addition to the stronger sales, operating costs were trimmed by 40 basis points, to 16.6 percent of sales from 17.0 percent the preceding year. Average gross margin was unchanged at 33.0 percent.

Helped by stronger sales and lower costs, operating profits climbed by 19.5 percent, to $465.1 million from $389.3 million last year. And despite all the problems posed by the tricky retail environment and slowing rate of sales growth, Kohl's still generated an impressive operating margin 00 operating profits measured as a percentage of sales — of 14.6 percent, up from 14.3 percent a year ago.

Putting a modest dent in the bottom line, interest expense, while still low, climbed sharply higher during the fourth quarter, by 216.5 percent, to $16.6 million from $13.1 million last year.

And stockpiles climbed twice as fast as sales during the period, moving up by 35.8 percent, to $1.6 billion, compared with the smaller 16.9 percent increase in sales.

During the year just past, Kohl's expanded its base by opening 75 new stores and opened four new markets, Boston, Houston, Nashville and Providence. This year the retailer said it plans to open 80 new stores, including 35 in the first quarter, as the retailer made its first move into the Southern California market, with the coordinated opening of 28 stores in the greater Los Angeles area on March 7.

Kohl's Corp.

Qtr. 2/1 (x000) 2003 2002 % change
Sales $3,184,479 $2,724,225 16.9
Oper. income (EBIT) 465,083 389,281 19.5
Net income 278,951 233,822 19.3
Per share (diluted) 0.81 0.68 19.1
Average gross margin 33.0% 33.0%
SG&A expenses 16.6% 17.0%
12 months
Sales 9,120,287 7,488,654 21.8
Oper. income (EBIT) 1,090,383 849,975 28.3
Net income 643,381 495,676 29.8
Per share (diluted) 1.87 1.45 29.0
Average gross margin 34.4% 34.3%
SG&A expenses 19.9% 20.4%


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