While Kohl’s posted comp-store sales gains in the fourth quarter and full year, sales fell in the final three months and income was down both for the period and for fiscal 2018.
In a Nutshell: Kohl’s achieved a 1 percent comparable-store sales increase in the fourth quarter, leading to a 1.7 percent increase for the year. The department store took several actions in the fourth quarter as part of its “Operational Excellence” initiatives, including the decision to close four underperforming stores in April, while opening four smaller format stores later in the year. Kohl’s ended the fiscal year with 1,159 stores in 49 states.
The company is also consolidating call center locations that support both its Kohl’s charge and online customers, and offered a voluntary retirement program to qualified hourly associates. These actions are expected to generate annual sales, general and administrative (SG&A) savings of approximately $20 million, and annual depreciation savings close to $5 million.
Kohl’s incurred $104 million in pretax charges in the fourth quarter as a result of these actions and estimated that roughly $50 million to $55 million of additional charges will be recorded in the first quarter of 2019, with most of the 2019 charges related to future lease commitments at the four stores that will be closing.
Moody’s vice president Christina Boni says the company is on the right track.
“Kohl’s has continued to be disciplined with its inventory down almost 2 percent and its debt reduction of over $900 million in 2018. Similar to many department stores, Kohl’s remains focused on cost reductions with an expected $20 million in savings expected in 2019,” Boni said.
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Sales: Revenue in the fourth quarter ended Feb. 2 fell 3.3 percent to $6.82 billion from $7.06 billion in the year-ago period. For the full year, revenue rose 0.7 percent to $20.23 billion compared to $20.08 billion in the 2017 fiscal year. Kohl’s noted that the 2017 fiscal fourth quarter and year included an extra week, with the approximate impact of total revenue of $180 million on the 2018 fiscal year.
Earnings: Net income in the fourth quarter decreased 42 percent to $272 million compared to $468 million in the year-ago period. For the year, net income was down 7 percent to $801 million form $859 million a year earlier.
CEO’s Take: Michelle Gass, Kohl’s CEO, said: “With a clear focus on driving traffic and operating with discipline, the company is delivering sales growth, while also improving profitability. We are financially strong and our overall health in the business is positioning us well for continued success.”