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Kohl’s Corporation (KSS - Analyst Report) posted fourth quarter fiscal 2012 earnings of $1.66, which beat the Zacks Consensus Estimate of $1.63 per share by 1.8%. The results were ahead of management’s expectation of $1.60–$1.62 per share. However, earnings declined 8.3% from the prior-year quarter earnings of $1.81 per share.

Excluding an extra week in fiscal 2012, earnings declined 11.6% from the prior-year quarter to $1.60 per share in the quarter due to loss of sales during the holiday season.

Though the company’s January sales were impressive as it was able to clear out its seasonal merchandise last month, it could not generate sufficient sales during the holiday season, as expected by the company. Kohl’s performance during the holiday season was impacted by unfavorable weather conditions and lower consumer confidence, which forced Kohl’s to give more-than-expected discounts to its customers.

This was reflected in December comparable-store sales, which were lower than the company’s expectations. Notably, the company’s November sales were also below expectations.

Sales and Margins

Net sales increased 5.4% to $6.34 billion, which includes the addition of one week in fiscal 2012. The company results beat the Zacks Consensus Estimate of $6.33 billion, but it lagged the company’s expectation of an increase in the range of 7% to 8%.

Excluding the addition of extra week in fiscal 2012, net sales climbed 2.5% from the prior-year quarter to $6.17 billion in the quarter driven by increase in comparable store sales. Kohl’s comparable store sales increased 1.9% from the prior-year quarter, way behind the guidance of an increase in the range of 3% to 4%. Sales picked up from the prior-year quarter, owing to an improvement in inventory levels.

Gross margin, including extra week, declined 290 basis points to 33.3% due to increased cost of merchandise. Operating margin also contracted 260 basis points to 13.4%, due to increase in selling, general and administrative expenses and depreciation expenses.

Fiscal 2012 Results

Kohl’s delivered earnings of $4.17 per share in fiscal 2012, which declined 3.0% from the prior-year earnings of $4.30 per share. The results however exceeded the Zacks Consensus Estimate of $4.14 per share and the company guided range of $4.11 and $4.13.

Net sales increased 2.5% from the prior-year to $19.28 billion, driven by increase in comparable store sales. Sales beat the Zacks Consensus Estimate of $19.25 billion.

Excluding one extra week, sales increased 1.6% to $19.11 billion, driven by 0.3% increase in comparable store sales. Earnings declined 4.4% to $4.11 per share.

Store Update

Kohl’s ended the quarter with 1,146 stores in 49 states compared with 1,127 stores a year ago. The company did not open or close any store in the quarter. During the year, Kohl's opened 21 new stores, including 1 relocated store, closed 1 store and completed 50 remodels, as of Feb 2, 2013.

Other Financial Details

Kohl's board declared a 9% hike in dividend and will now pay its shareholders a dividend of 35 cents over its previous dividend. The new dividend will be paid on Mar 27, 2013 to shareholders of record as of Mar 13.


For fiscal 2013, Kohl’s expects earnings in the range of $4.15 to $4.45 based on the expectation of total sales and comparable store sales increases of 0% to 2%.

For first quarter fiscal 2013, Kohl’s expects earnings in the range of 55 to 63 cents per share, sales to increase in the range of 0.5%–2.5% and comparable store sales to increase in the range of 0%–2%.

Kohl’s now has a Zacks Rank #5 (Strong Sell). Other retail and wholesale stocks that warrant a look include Green Mountain Coffee Roasters, Inc (GMCR - Analyst Report), The TJX Companies Inc (TJX - Analyst Report) and Natural Grocers by Vitamin Cotta (NGVC - Snapshot Report). Green Mountain carries a Zacks Rank #1 (Strong Buy), while TJX and Natural Grocers hold a Zacks Rank #2 (Buy).

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