Kohl’s Q1 profit up sharply but sales still slide

Kohl’s Corp. posted mixed results for its first quarter, as sales continued to decline but profit jumped amid expense control and more careful inventory management.



The retailer reported net income of $66 million, or 39 cents per share, in the quarter ended April 29, up from $17 million, or nine cents per share, in the year-ago quarter. The gain, much better than expected, came as the company cut general expenses by $33 million.



Sales decreased 3.2% to of $3.84 billion. Same-store sales fell 2.7%, the fifth consecutive quarter of decline.



Håkon Helgesen, analyst at GlobalData Retail, noted that while Kohl’s has undertaken a series of positive actions, “it has still failed to grow its top line, and worryingly the pace of decline is accelerating.”



“Some of this is down to store closures; some is down to lower footfall in locations where Kohl's operates; and, some is down to Kohl's itself,” Helgesen said. “The improvement in profits buys Kohl's time to remedy these issues. They also position the company to cope with a lower demand environment. However, they do not absolve the necessity of swinging the top line back into growth over the course of this year.”



Kohl's grew its gross margin for the quarter to 36.4% from 35.5% last year. Merchandise inventories also improved, down 2.3% for the quarter.



"We are encouraged by the significant improvement in sales and traffic for the March and April period, after a weak February start to the first quarter,” stated Kohl’s CEO and chairman Kevin Mansell. “Continued strong inventory management led to a major improvement in gross margin, and our teams managed expenses exceptionally well. I am pleased to say that combined together these efforts led to an increase in income for the period."



Kohl’s ended the quarter with 1,154 Kohl's stores, 12 FILA Outlet stores, and three Off/Aisle clearance centers in 49 states, compared with 1,167 Kohl's stores at the same time last year.