Kohl’s, Gap report strong sales, big profit jumps
Kohl’s Corp., the mid-priced department store chain that has been aggressively grabbing market share, and apparel retailer Gap Inc., which is in the midst of a turnaround, both reported strong sales as well as double-digit profit gains for the fourth quarter.
For the three months that ended Jan. 30, Kohl’s profit increased 28% to $431 million, or $1.40 a share, compared with $336 million, or $1.10, in the year-earlier quarter, the company said Thursday. Total sales increased 8.5% to $5.7 billion, and sales at stores open at least a year -- known as same-store sales and considered an important measure of a retailer’s health -- increased 4.5%.
Kohl’s opened 30 new California stores in former Mervyns locations last year, helping to fill a void left by the recent collapse of Mervyns, Gottschalks and other retailers. With a wide selection of mid-priced apparel, housewares and accessories, plus regular discounts and coupons, analysts say, Kohl’s fits in well with consumers’ new frugality.
“Things are looking good at Kohl’s,” said Patrick McKeever, a retail analyst at MKM Partners. “It seems like the company has seen more broad-based improvement across regions over the past couple of quarters. . . . Kohl’s really plays more into moderate consumer recovery than other retailers.”
For the year, Kohl’s profit was $991 million, or $3.23 a share, up from $885 million, or $2.89, for fiscal 2008. Total sales rose 4.8% to $17.2 billion. Same-store sales increased 0.4%.
Chief Executive Kevin Mansell said the company’s results were helped by tight inventory control, reduced expenses and strong sales of the chain’s private and exclusive brands.
For the current year and quarter, the Menomonee Falls, Wis.-based retailer expected total sales to rise 4% to 6% and same-store sales to rise 1% to 3%. Mansell cautioned that consumers continued to be financially strained and were “looking for value and ways to make their dollars go further.”
“As a result, we are planning conservatively,” he said in a statement. “We will be very competitive in order to continue to gain market share. We are focused on the future as we invest prudently in stores -- both new and remodeled -- and our high-growth e-commerce business, technology and talent.”
Kohl’s operates 1,058 stores in 49 states and plans to open about 30 stores and remodel 85 stores this year, the company said.
At Gap, performance was driven by healthy sales, especially at its Old Navy stores, and improved margins.
For the quarter that ended Jan. 30, the San Francisco company’s profit increased 45% to $352 million, or 51 cents a share, from $243 million, or 34 cents, for the same period a year earlier.
Total sales were $4.24 billion, up 3.9% from $4.08 billion in the year-earlier quarter. Same-store sales increased 2%.
“We ended 2009 with a much-improved economic model and strong balance sheet,” Chief Executive Glenn Murphy said in a statement. “We’re now ready for our business to grow and move forward as we aim to gain market share in North America and make a series of investments to bring our well-known brands to more customers around the world.”
For the full year, Gap said profit was $1.1 billion, or $1.58 a share, up 14% from $967 million, or $1.34, in the prior year. Total sales for fiscal 2009 were $14.2 billion, a 2.3% drop from $14.53 billion. Same-store sales fell 3%.
By the end of this year, Gap plans to open its first Gap stores in China and Italy, expand Banana Republic in Europe and add more outlet stores in Canada, Europe and Asia.
Betty Chen, a retail analyst at Wedbush Morgan Securities, said that Gap’s results were encouraging and that she would like to see more improvement this year.
“In general, we feel like they have been executing well and making improvements in their three major brands,” she said. “I think the key for us is understanding how they can take it to the next level.”
Shares of Kohl’s rose $2.49, or 4.8%, to $54.08 on Thursday.
Shares of Gap, which released its earnings after the markets closed, rose 10 cents, or 0.5%, to $20.39 in regular trading.
