Kohl’s on Thursday reported that Q2 total sales dropped 0.9% to $4.14 billion from $4.18 billion in the prior-year period — beating the Thomson Reuters I/B/E/S analyst projection for $4.13 billion.
Same-store sales in the quarter fell 0.4%, a recovery from the 1.8% decline in the year-ago period and besting the FactSet projection for a 1.5% decline, cited by CNBC.
Net income in the quarter fell 6% to $208 million or $1.24 per share, from $140 million, or 77 cents per share, in the year-ago quarter. That bested the Thomson Reuters I/B/E/S average analyst estimate for adjusted earnings of $1.19 per share. Shares rose on the report but were dialed back by investors after Macy’s lowered its guidance in its own Thursday morning financial report, according to MarketWatch.
Kohl’s paid for Macy’s struggles on Wall Street Thursday morning, but that belies some solid good news, not least their virtually flat — and not badly declining — same-store sales result, according to a note from Global Data Retail analyst Anthony Riva emailed to Retail Dive.
"The much smaller dip in revenues indicates that the business is going in the right direction and has gained momentum since the start of the year," he said. "Meanwhile, Kohl's ongoing work on expense reduction and more careful management of inventory continues to boost profit lines."
Moody's Investors Service analyst Christina Boni linked the two retailers Thursday morning, too, but hailed their progress in a tough market. "Macy's and Kohl's both posted relative improvement in sales trends as initiatives undertaken take hold," she said in a note emailed to Retail Dive. "Department stores continue to have much work ahead as they battle to stay relevant."
It’s telling that flatlining same-store sales is flagged as an achievement, but Riva noted that it comes amid extreme pressures in the department store sector and that the numbers represent the retailer’s best performance in that measure since its fourth quarter last year. "[It] brings to an end a long line of big slumps in the same-store number," he said. "It also comes against a backdrop of more muted demand and footfall, especially within the department store sector."
GlobalData Retail analysts have criticized the retailer for cluttered, uninviting stores, but even with a greater range of incoming merchandise, Kohl’s has managed to spiff things up. That’s making a difference, according to Riva.
"One of the risks of Kohl's strategy of having more brands was that it could have made stores cluttered and crowded with a jumble of stock," he said. "However, the company has done much work around optimizing product mix across its portfolio, including tailoring ranges according to location. The net impact is clearer store presentation, more effective allocation of inventory and a range that is more relevant to local customers. This has elevated the shopping experience, reduced markdowns and improved profitability."
Cost-cutting and closing under-performing stores have also netted the company benefits, and its turnaround hasn’t taken up too many resources. Along with improved inventory control, the company has streamlined its organization to its benefit and better merged its online and offline strategies. In fact, Kohl’s is now at the point where it could actually contemplate opening new stores in key areas, Riva suggested.
"[W]hile we do not deny that the market will remain perilous, we believe Kohl's has charted a sensible course through the choppy waters of department store retailing," he said.