Kohl’s on Tuesday reported a fourth-straight quarterly increase in same-store sales, reflecting in part the positive impact of its efforts to downsize stores and reduce inventory.
According to the Milwaukee Journal Sentinel, the retailer has also been benefiting from “the wave of department store closings that has left shoppers with fewer options in many markets.”
CFO Bruce Besanko told analysts on the second-quarter earnings call that Kohl’s grabbed its “fair share” of the extra business generated by the closures and expects to do even better as the bankrupt Bon-Ton chain closes its more than 200 stores after wrapping up liquidation sales.
The results “exceeded our expectations on both the top and bottom lines,” Chief Executive Officer Michelle Gass said.
For the quarter ended Aug. 4, Kohl’s comparable store sales, a key retail metric, rose 3.1%, beating analysts’ estimates of a 2.7% gain. The company said online sales increased at a mid-teens percentage rate.
Profit surged 40.4% to $292 million, or $1.76 per share, while revenue climbed 4% to $4.57 billion. Analysts had forecast earnings of $1.64 a share on revenue of $4.26 billion.
The Journal Sentinel said Kohl’s performance has been boosted by its efforts to downsize its stores and the amount of merchandise they carry, enabling the company to carve out excess space and lease it to other businesses.
Inventory per store fell by 8% in the quarter, and about a third of Kohl’s locations essentially are operating as smaller stores. Earlier this year, the company said it will lease space at five to 10 locations to discount grocer Aldi.
Kohl’s also has a unique partnership with Amazon, selling the Amazon Echo and accepting returns for the digital retailer at a handful of its stores. It said Tuesday it will begin carrying the Nine West brand of women’s shoes, handbags and clothing next summer.
“What excites [us] most about the story is the company’s potential pipeline of multi-year traffic drivers, including its Amazon Returns partnership and subleasing excess space to other high-frequency concepts,” Gordon Haskett analyst Chuck Grom said.
