Kohl's Conference Call Highlights

Kohl's Corporation KSS reported its fourth quarter earnings on Thursday. Shares of the company are down 3 percent.

Below are some key highlights from its conference call.

Performance Metrics:

• Comp sales decreased 1.8% for the quarter.
• Transactions per store were down 2.6% while average transaction value was up 0.8%.
• Within the average transaction value, average unit retail was up 2.6% while units per transaction were down 1.8%.
• Total sales for the quarter were $4.4 billion, a decrease of 1.6% from the third quarter last year, and year to date, comp sales decreased 2.2% and total sales decreased 1.9% to $12.7 billion.
• Our gross margin rate for the quarter was 37.2%, 28 basis points lower than the third quarter of last year.
• National brand sales penetration increased 230 basis points during the quarter.
• As expected, this reduced gross margin by approximately 12 basis points.
• The remaining decrease was due to lower margin rates across our brands.
• Year-to-date, margin was consistent with last year. SG&A dollars increased 2% or $24 million over last year and deleveraged 90 basis points to the percent of sales compared to the third quarter of last year.
• Most of the increase in SG&A dollars versus last year was related to a change in our incentive compensation accrual.
• Last year we lowered our expected payout during the third quarter, resulting in favorability and bonus expense.
• Our Credit Card business reported a $7 million increase in revenues this quarter.
• In our stores, both store payroll and store controllable costs decreased versus last year.
• Our retail distribution centers reported lower costs, but our e-commerce fulfillment centers reported higher costs with the revenue growth.
• Advertising costs were also higher as we launched our loyalty program nationwide in the third quarter. And we continue to invest in technology.
• Year-to-date, SG&A was relatively flat to last year and deleveraged 50 basis points as a percent of sales.
• Depreciation and interest expenses were consistent with last year.
• Our income tax rate was 35.3% for the quarter.
• Diluted earnings per share decreased 14% to $0.70 for the quarter.
• Year-to-date, earnings per share decreased 3% to $2.43. Net income was $142 million for the quarter and $498 million year-to-date.
• We ended the quarter with 1,163 stores, gross square footage of 100,494,000 square feet, and selling square footage of 83,000,833.
• During the third quarter, we opened stores in three new locations and reopened one store, which had closed in the first quarter for a complete rebuild.
• We completed our final two remodels for the year early in this quarter.
• This is in addition to the 16 remodels completed during the second quarter and the 15 remodels that were completed in the first quarter. The total remodels for the year were 33 versus 30 last year.
• Year-to-date capital expenditures were $561 million, which is $96 million higher than the first nine months of 2013.
• The increase reflects our continued investment in the company, and is attributable to the higher spending in substantially all categories: remodels, IT, call center operations, and our corporate campus.
• We ended the quarter with $631 million of cash and cash equivalents, and generated almost $300 million of free cash flow year-to-date.
• Free cash flow was negatively impacted by the higher capital expenditures as well as higher tax payments during the quarter.
• Despite the lower-than-expected sales, inventory per store is flat to last year.
• Units per store are 3% lower than 2013 levels.
• AP as a percent of inventory increased from 45.6% at quarter-end in 2013 to 47.9% this year.
• Weighted average diluted shares for the quarter and shares outstanding at the end of the quarter were both 203 million.
• During the quarter, we repurchased 2.7 million shares of our stock.
• Yesterday, our board declared a quarterly cash dividend of $0.39 per share, which is payable December 24 to shareholders of record at the close of business on December 10.