Same-store sales at Kohl’s Corporation (KSS) went down 1.9% in the four-week period ended August 27, 2011 compared with an increase of 4.5% in the year-ago period. On a year-to-date basis, same-store sales increased 1.1% in August 2011.
Total sales declined 0.1% to $1,414.0 million for the four-week period ended August 27, 2011 compared with $1,416.0 million in the same period ended August 28, 2010. Further on a year-to-date basis, total sales increased 2.9% to $9,824.0 million, compared with $9,551.0 million for the prior year seven months ended August 28, 2010.
Sales were mostly affected by Hurricane Irene and generally lower consumer traffic. However, Kohl’s is working aggressively on its pricing focus for the remainder of 2011. Further, the company believes that these steps, combined with the launch of the Jennifer Lopez and Marc Anthony launches will have a favorable impact on sales for the remainder of the year 2011.
However, same-store sales at Kohl’s peer company, Target Corp. (TGT) went up 4.1% in August, 2011, while it increased 3.1% in the seven months ended August 27, 2011. August's comparable-store sales were in line with management’s expectations.
During the second quarter of 2011, Kohl’s added 30 stores to reach a total of 1,097 stores in 49 states, compared with 1,067 stores in the prior-year quarter. The company expects to open an additional 31 stores and remodel 15 stores in September.
Guidance
Driven by strong profits in the second-quarter, Kohl’s expects to increase its total sales forecast to 4% – 6%, and comparable store sales forecast to 2% – 4% for fiscal 2011.
Conclusion
Kohl’s has had a consistent merchandise mix over the past three years. In addition, the company’s pricing strategy and overall profitability culture are focused on maintaining a low-cost structure.
A strong balance sheet coupled with strong cash balances and attractive dividend yields makes the stock attractive. However, mid-priced retailers like Kohl's are struggling to combat rising input costs.
Kohl’s holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Currently, we maintain a long term Neutral recommendation on the stock.
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