Kohl’s said its reported net income in the quarter rose 8 percent, to $140 million, or 77 cents per diluted share, from $130 million, or 66 cents per diluted share in the comparable period. Adjusted net income advanced 5 percent, to $221 million, or $1.22 per diluted share, from $211 million, or $1.07 per diluted share in the comparable period. Those results were well above forecasts for diluted earnings per share of $1.03.
Revenues declined 2 percent year-over-year, to $4.2 billion, roughly in line with estimates. Comparable store sales slipped 1.8 percent.
Kevin Mansell, Kohl’s chairman, president and CEO, said sales during the quarter were below the firm’s expectations, with May posing the biggest challenges.
“June was aided by warm weather early in the month along with favorable calendar shifts, with Memorial Day falling in fiscal June and Fourth of July moving to fiscal July,” Mansell explained during the firm’s conference call. “July finished very strong as we moved our credit event a week closer to back-to-school, and those businesses especially juniors, young men’s and girls, performed extremely well.”
On footwear performance in Q2, Mansell added, “Footwear ran with the company, with strength in kids and men’s dress casual and weakness in women’s. Children’s showed relative strength in girls and boys, while infants and toddlers were more difficult as we continue to work on revitalizing our Jumping Beans brand.”
Kohl’s has been placing an added emphasis on its footwear assortment in recent months, adding Stride Rite to its children’s department and relaunching New Balance in Q1.
“The launch of Stride Rite help kids shoes to outperform and New Balance achieved a 90 percent comp for the [second] quarter,” Mansell said. “… Nike continues to be very strong achieving a low double-digit comp in the quarter.”
The headline-making addition of Under Armour footwear to the department store in 2017, Mansell said, will further boost its active and wellness category, which has already grown to 18 percent of Kohl’s’ total business. The company also opened 12 Fila stores in May and two additional off-aisle stores in March.
Looking ahead, the company downward adjusted its earnings forecast.
The company now expects its fiscal 2016 diluted EPS to be in the range of $3.12 to $3.32. Adjusted diluted EPS is expected to be in the range of $3.80 to $4.00, compared to the firm’s prior guidance of $4.05 to $4.25.
Kohl’s ended the quarter with inventory per store down 6 percent.
“We continue to expect to make progress on [inventory] throughout the year, targeting end of third quarter levels of down mid-single digits on a per store basis,” Mansell said.