Kohl’s has home top of mind in 2010

Raises FY outlook as 3Q profit jumps 20%

Menomonee Falls, Wis. – Home is an area of focus today and going forward at Kohl’s as the mid-tier department store chain looks to increase brand offerings in the category as well as revamp the in-store presentation and expand the depth of its offering online.

During its third-quarter earnings call today, chairman, president and ceo Kevin Mansell outlined the initiatives in the queue to boost Kohl’s Corp.’s home business.

For starters, “a dramatically redesigned home area” will be included in about 30 new and 65 or more remodeled units in 2010. The enhanced presentation is meant to give the category “more capacity on the sales floor and more flexibility in our fixture presentation.” Kohl’s currently operates 1,059 units in 49 states.

Additionally, Kohl’s is “highly intent on maximizing” some of its exclusive men’s and women’s apparel brands home, footwear, accessory and jewelry more effectively. “We think there is a lot of opportunity to do that. In many cases they aren’t penetrated as well in those areas simply because of a lack of offering or lack on intensity in merchandise presentation or lack of marketing. So that’s probably our primary focus,” Mansell continued.

New brands are another possibility for home, Mansell hinted. “We’ve had a lot of new introductions in women’s and a fair amount in kids, so areas like men’s or home are probably higher in terms of their importance of areas we are looking at for newness.” He added that any potential announcements of new exclusive brands will be released in February during Kohl’s fourth-quarter and yearend conference call.

Kohl’s ecommerce site has been broadening its overall product offerings, including home, said Mansell.

“We might carry a small bath rug in store but carry a much larger room-size rug direct through the vendor,” explained Wes McDonald, cfo. “Before last year we really weren’t in that business at all. It is a drop-ship business.”

Home was among three businesses – along with men’s and women’s – that performed “substantially with the company comp” furing the third quarter Mansell said.

Net income roared ahead by 20% to $193 million, or 63 cents per share, for the quarter ended Oct. 31.

Sales climbed 6.5% to $4.1 billion, and comps increased 2.4%.

For the nine-month period, net income rose $560 million, or $1.83 per share.

Slaes increased 3.1% to $11.5 billion, and comps declined 1.3%.

Looking ahead to the fourth quarter, Kohl’s expects total sales will increase between 3% and 6%, with comps of -1% to 2%. Gross margin is expected to increase 50 to 60 basis points over last year.

Kohl’s is projecting fourth quarter earnings diluted share of $1.14 to $1.24.

Kohl’s updated guidance its fiscal year guidance to $2.98 to $3.08 per diluted share. The guidance does not reflect any additional share repurchases in fiscal 2009, Mansell said.

The company now plans to open about 30 new stores in 2010 – up from previous guidance of 20 to 25. The current plan is still to remodel 65 stores 2010, but “we are considering expanding that number pending our holiday results and the selling environment overall,” he added.

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