Kohl’s posts strong earnings, sees Bon-Ton boost

Sales at established Kohl’s Department Stores rose 3.1 percent in the second quarter, a healthy gain that keeps the retailer on an upward path.

It was Kohl’s fourth straight quarter of year-over-year gains in comparable store sales, a key measure of retail performance.

The Menomonee Falls-based firm could get a further boost going forward: The closing of the roughly 200 stores in the bankrupt Bon-Ton chain stands to benefit Kohl’s in particular as shoppers seek alternatives, Chief Financial Officer Bruce Besanko told analysts Tuesday during a conference call.

“The Bon-Ton stores are typically located in regions where our brand is particularly strong,” Besanko said.

Kohl’s earned $1.76 per share in the three months ended Aug. 4, up 42 percent from a year ago and easily beating analysts average prediction of $1.64 a share.

Also surprised — in a good way — were Kohl’s executives. The company’s overall results “exceeded our expectations on both the top and bottom lines,” CEO Michelle Gass told analysts.

Gass said she was “extremely pleased” with the company’s

performance and looks for continued strong results.

“We view this traction, this momentum, as sustainable,” she said.

Gass said Kohl’s has benefited from the ongoing efforts to downsize its stores and the amount of merchandise they carry. The retailer reduced inventory per store by 8 percent in the quarter and now has 500 locations — out of 1,158 total — that essentially are operating as smaller stores, Gass said.

That initiative paves the way for Kohl’s to carve out excess space and lease it to other businesses. Earlier this year, the company said it will lease space at five to 10 locations to discount grocer Aldi. Tuesday, Gass said Kohl’s is “building a nice, robust pipeline” of potential tenants.

Gass also announced Tuesday that Kohl’s will begin carrying the Nine West brand of women’s shoes, handbags and clothing next summer. The addition will broaden Kohl’s appeal to millennials, Gass said.

The Nine West brand’s former parent company filed for bankruptcy reorganization in April and two months later sold the brand to another firm.

As she has to date, Gass declined to quantify the results of Kohl’s much-watched pilot project with online retailing giant Amazon.

Not quite a year ago, Kohl’s began accepting returns of goods purchased on Amazon at 82 stores in Chicago and Los Angeles. In July, Kohl’s added 21 southeastern Wisconsin stores to the experiment. The company also has set up Amazon shops inside 10 of the Chicago and Los Angeles stores.

Analyst Chuck Grom of Gordon HaskettResearch Advisors has said Chicago stores participating in the partnership are attracting more foot traffic — an important goal for Kohl’s — than their nonparticipating peers.

But while analysts peppered Gass for numbers, she remained noncommittal.

“This is a big deal for us and for Amazon,” she said. “We are studying it very closely.”

Gass said Kohl’s is “really pleased with the partnership,” and is happy with the way customers have responded to it, but wants to further assess the results before pressing forward.

“Stay tuned, but we’re feeling optimistic,” she said.

Kohl’s also raised its earnings guidance for fiscal 2018 by five to 10 cents a share. The company, which previously had projected earnings of $4.86 to $5.31 per share for the year, now expects to earn $4.96 to $5.36.

For the recently concluded quarter, Kohl’s took in $4.57 billion in revenue, up from $4.40 billion a year ago. The firm earned $292 million in the period, an increase of 40 percent over the $208 million the company earned in the second quarter of 2017.