Kohl's July Sales Up - Analyst Blog

Kohl’s Corporation (KSS) reported a 4.1% hike in its comparable-store sales for the four-week month ended July 31, 2010, with a 4.6% increase in the second quarter of 2010. The departmental store operator also raised its second-quarter earnings per share guidance to 80 cents – 82 cents from the prior guidance of 70 cents – 75 cents, following its sales performance in July while remaining enthusiastic regarding the back-to-school season. The second-quarter results were ahead of the company’s guidance of a 2.0% to 4.0% increase.

The robust performance in July was mainly driven by increases in the number of transactions per store. The Southeast was the best performing region and footwear and men’s products were the best sellers. However, average unit retail and units per transaction continued to show modest declines.

In July, the company’s peer group also witnessed impressive comparable-stores sales results. Nordstrom Inc. (JWN) and Macy’s Inc. (M) recorded a respective 7.6% and 7.3% increase in comparable-stores sales results for the month. In contrast, J.C.Penney Company Inc. (JCP) reported a 0.6% comparable-store sales decline in July.

Total sales for the four-week month ended July 31, 2010, climbed 7.1% to $1.16 billion over the four-week month ended August 1, 2009, while second-quarter sales registered a 7.7% year-over-year increase.

Year to date, Kohl’s comparable-store sales jumped 5.9% and total sales increased 9.3% to $8.14 billion, on an annualized basis.

Headquartered in Menomonee Falls, Wisconsin, Kohl’s continues to meet and exceed high expectations with impressive execution throughout its operations. Moreover, the company’s pricing strategy and overall profitability culture is focused on maintaining a low-cost structure. We expect strong traffic and market share gains to drive earnings growth in the near future.

However, the majority of its sales and income are typically realized during the second half of each fiscal year. Hence, we remain cautious about the company’s business that is subject to seasonal influences, thereby maintaining our Neutral recommendation for the stock.