Kohl's Keeps It Simple

The retailing industry constantly recycles itself, as once-popular stores lose touch with their shoppers and fade away and newer entrants more in tune with customers rise to the fore. Kohl's (NYSE:KSS) is hardly a newcomer, but the company is showing that it has the mettle to last in the cutthroat world of broad-line apparel retailing.   

A So-So Quarter
Kohl's may be winning the war, but the company does not win every battle. For the third quarter, the company delivered total sales growth of a bit more than 4% on the back of 1.8% comp-store sales growth. That 1.8% is below the company's 2 to 4% target, but perhaps not so much so to be a long-term worry. Interestingly, it appears that traffic stayed pretty strong, but the average ticket declined - a positive outcome in the sense that it means shoppers keep showing up at Kohl's, even if they are spending less.

Profitability was a bit more of a concern. Gross margin did rise 50 basis points, but the company lost all of that and more on the SG&A line, leading to a 50-basis point decline in operating margin. Kohl's also reported a 5.9% increase in inventory; a figure that bears monitoring for the next quarter or two. 


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