Kohl’s profit up; exclusive lines selling well

By Phil Wahba

NEW YORK (BestGrowthStock) – Mid-tier department store operator Kohl’s Corp (KSS.N: ) reported a higher-than-expected fourth-quarter profit (Read more your timing to make a profit.) and forecast continued growth from its lucrative exclusive brands, sending its shares up 3.7 percent.

The company expects earnings for this fiscal year that could fall short of Wall Street estimates due to weak consumer sentiment, though investors shrugged that off based on the company’s pattern of understated forecasts.

“We owe it to our investors not to get ahead of the consumer,” Chief Executive Kevin Mansell said on a call with analysts, referring to the sluggish economy’s potential impact on spending this year.

“Consumers continue to be financially constrained … as a result, we are planning conservatively in our sales expectations, inventory levels and expenses,” he said.

Analysts said the modest forecasts were simply an admission that in the absence of a spending rebound, the company may be running out of ways to increase profits.

“They’re just acknowledging that even if they are doing well, it’s tough for the consumer and because of that, (2010) could be a year of intensified competition,” Edward Jones analyst Matt Arnold said.

Kohl’s net profit rose 28.3 percent to $431 million, or $1.40 a share, in the fourth quarter that ended January 30, from $336 million, or $1.10 a share, a year earlier.

Analysts’ average estimate was $1.37 cents per share, according to Thomson Reuters I/B/E/S. Sales rose 8.5 percent to $5.68 billion.

Leaner inventories helped lift its gross margins 1.6 percentage points to 36.4 percent.

Sales at stores open at least a year were up 4.5 percent. Kohl’s expects comparable sales to rise between 1 percent and 3 percent in the current quarter and the full year.

A FOCUS ON EXCLUSIVES

Kohl’s has performed better than rivals including Macy’s (M.N: ) and J.C. Penney (JCP.N: ) by being quick to beef up its exclusive lines, which are popular with customers, giving the store a higher profit per item sold.

Kohl’s said those lines, which include Simply Vera Wang, Dana Buchman and Candie’s, gained about 2 percentage points to reach 42.7 percent of sales during the quarter, with more growth expected in 2010.

Kohl’s forecast earnings of 48 cents to 52 cents per share for the first quarter and between $3.40 and $3.63 for the full year. Analysts on average are expecting 54 cents for the quarter and $3.63 for the full year.

“The forecast is prudent, but they do this every quarter and then beat their guidance,” said Walter Stackow, an analyst with Manning & Napier, which owns Kohl’s shares. “I don’t see a slowdown in the momentum of what’s helping its growth.”

The company said it expects to open some 30 stores and remodel 85 others during the year. It operates about 1,060 stores in the United States.

Kohl’s shares rose 3.7 percent, or $1.92, to $53.51 in mid day New York Stock Exchange trading.

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(Reporting by Phil Wahba, editing by Dave Zimmerman, Maureen Bavdek)

Kohl’s profit up; exclusive lines selling well