Kohl's Corporation Reports Second Quarter Financial Results

MENOMONEE FALLS, Wis.--()--Kohl’s Corporation (NYSE:KSS). Kohl’s Corporation today reported results for the quarter and year-to-date period ended August 1, 2015.

         
  Quarter   Year to Date
($ in millions)   2015   2014   Change   2015   2014   Change
Sales $ 4,267   $ 4,242   0.6% $ 8,390   $ 8,312   0.9%
Comparable store sales 0.1 % (1.3 )% - 0.8 % (2.3 )% -
Gross margin 38.9 % 39.0 % (6) bp 38.0 % 37.9 % 5 bp
Net income
Reported $ 130 $ 232 (44)% $ 257 $ 357 (28)%
Excluding loss on
extinguishment of debt $ 211 $ 232 (9)% $ 340 $ 357 (5)%
Diluted earnings per share
Reported $ 0.66 $ 1.13 (42)% $ 1.29 $ 1.73 (25)%
Excluding loss on
extinguishment of debt   $ 1.07     $ 1.13     (5)%   $ 1.70     $ 1.73     (2)%
 

Kevin Mansell, Kohl's chairman, chief executive officer and president, said, "Our sales results were below our plan as the shift of sales in tax-free states from July into August was larger than anticipated. Our expenses were well managed for the season. Our inventory receipts are well-positioned for the back-to-school and fall seasons."

Dividend

On August 11, 2015, Kohl's Board of Directors declared a quarterly cash dividend on the Company's common stock of $0.45 per share. The dividend is payable September 23, 2015 to shareholders of record at the close of business on September 9, 2015.

Store Update

Kohl’s ended the quarter with 1,164 stores in 49 states, compared with 1,160 stores at the same time last year.

Loss on Extinguishment of Debt and Guidance Update

As previously reported, the Company completed a cash tender offer for $767 million of debt. In addition, the Company exercised its right to redeem $318 million of notes due in 2017 which were not initially tendered. The Company also issued $1.1 billion in new notes. In conjunction with the refinancing, the Company incurred a loss of approximately $170 million. $131 million was recognized in the second quarter of fiscal 2015 and the Company expects an additional $39 million to be recognized in the third quarter of fiscal 2015 when the remaining 2017 notes are settled.

Absent the effect of the loss on the extinguishment of debt, the Company now expects its fiscal 2015 earnings per diluted share to be at the low range of its previous guidance of $4.40 to $4.60.

Second Quarter 2015 Earnings Conference Call

Kohl's will host its quarterly earnings conference call at 8:30 am ET on August 13, 2015. The phone number for the conference call is (800) 230-1074. Replays of the call will be available for 30 days by dialing (800) 475-6701. The conference ID for both the live call and the replay is 346895. The conference call and replays are also accessible via the Company's web site at http://www.kohlscorporation.com/InvestorRelations/event-calendar.htm.

Cautionary Statement Regarding Forward-Looking Information

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including 2015 earnings guidance. Kohl's intends forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “anticipates,” “plans,” or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause Kohl's actual results to differ materially from those anticipated by the forward-looking statements. These risks and uncertainties include, but are not limited to, those described in Item 1A in Kohl's Annual Report on Form 10-K, which is expressly incorporated herein by reference, and other factors as may periodically be described in Kohl's filings with the SEC.

About Kohl's

Kohl’s (NYSE: KSS) is a leading specialty department store with 1,164 stores in 49 states. With a commitment to inspiring and empowering families to lead fulfilled lives, the company offers amazing national and exclusive brands, incredible savings and inspiring shopping experiences in-store, online at Kohls.com and via mobile devices. Committed to its communities, Kohl’s has raised more than $274 million for children’s initiatives nationwide through its Kohl’s Cares® cause merchandise program, which operates under Kohl's Cares, LLC, a wholly-owned subsidiary of Kohl's Department Stores, Inc. For additional information about Kohl’s philanthropic and environmental initiatives, visit www.Kohls.com/Cares. For a list of store locations and information, or for the added convenience of shopping online, visit www.Kohls.com.

Connect with Kohl’s:

Facebook (http://www.facebook.com/Kohls)

Twitter (http://twitter.com/Kohls)

Google+ (http://plus.google.com/+Kohls)

Pinterest (http://pinterest.com/Kohls)

Instagram (http://instagram.com/Kohls)

YouTube (http://www.youtube.com/Kohls)

 
KOHL'S CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Millions, except per share data)
(Unaudited)
       
Three Months Ended Six Months Ended
August 1, August 2, August 1, August 2,
2015 2014 2015 2014
Net sales $ 4,267 $ 4,242 $ 8,390 $ 8,312
Cost of merchandise sold 2,605   2,588   5,206   5,162  
 
Gross margin 1,662 1,654 3,184 3,150
 
Operating expenses:
Selling, general, and administrative 1,005 981 2,021 1,981
Depreciation and amortization 233   222   459   438  
 
Operating income 424 451 704 731
 
Interest expense, net 84 85 168 170
 
Loss on extinguishment of debt 131     131    
 
Income before income taxes 209 366 405 561
Provision for income taxes 79   134   148   204  
 
Net income $ 130   $ 232   $ 257   $ 357  
 
Basic net income per share $ 0.66 $ 1.14 $ 1.30 $ 1.74
Average number of shares 196 204 198 205
 
Diluted net income per share $ 0.66 $ 1.13 $ 1.29 $ 1.73
Average number of shares 197 205 199 206
 
As a percent of net sales:
Gross margin 38.9 % 39.0 % 38.0 % 37.9 %
Selling, general and
administrative expenses 23.6 % 23.1 % 24.1 % 23.8 %
Operating income 9.9 % 10.6 % 8.4 % 8.8 %
Net income 3.0 % 5.5 % 3.1 % 4.3 %
 
Excluding loss on extinguishment of debt:
Net income $ 211 $ 232 $ 340 $ 357
Diluted net income per share $ 1.07 $ 1.13 $ 1.70 $ 1.73
Net income as a percent of net sales 5.0 % 5.5 % 4.1 % 4.3 %
 
KOHL'S CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Millions)
(Unaudited)
   
August 1, August 2,
2015 2014

Assets

Current assets:
Cash and cash equivalents $ 934 $ 746
Merchandise inventories 4,252 3,899
Deferred income taxes 130 132
Other 310   323
 
Total current assets 5,626 5,100
 
Property and equipment, net 8,528 8,686
Other assets 201   281
 
Total assets $ 14,355   $ 14,067
 

Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable $ 1,566 $ 1,479
Accrued liabilities 1,125 1,057
Income taxes payable 53 66
Current portion of long-term debt 317
Current portion of capital lease
and financing obligations 117   105
 
Total current liabilities 3,178 2,707
 
Long-term debt 2,791 2,778
Capital lease and financing obligations 1,821 1,896
Deferred income taxes 318 315
Other long-term liabilities 570 562
Shareholders' equity 5,677   5,809
 
Total liabilities and shareholders' equity $ 14,355   $ 14,067
 
KOHL'S CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
(Unaudited)
 
  Six Months Ended
August 1,   August 2,
2015 2014
Operating activities
Net income $ 257 $ 357
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 459 438
Share-based compensation 24 24
Excess tax benefits from share-based compensation (10 ) (2 )
Deferred income taxes (65 ) (17 )
Other non-cash revenues and expenses 17 11
Loss on extinguishment of debt 131
Changes in operating assets and liabilities:
Merchandise inventories (433 ) (20 )
Other current and long-term assets 60 2
Accounts payable 55 114
Accrued and other long-term liabilities (121 ) (103 )
Income taxes (21 ) (74 )
Net cash provided by operating activities 353   730  
 
Investing activities
Acquisition of property and equipment (377 ) (374 )
Other 3   6  
Net cash used in investing activities (374 ) (368 )
 
Financing activities
Treasury stock purchases (543 ) (392 )
Shares withheld for taxes on vested restricted shares (23 ) (16 )
Dividends paid (178 ) (160 )
Proceeds from issuance of debt 1,098
Deferred financing costs (9 )
Reduction of long-term borrowings (767 )
Premium paid on redemption of debt (126 )
Capital lease and financing obligation payments (54 ) (61 )
Proceeds from stock option exercises 140 37
Excess tax benefits from share-based compensation 10 2
Proceeds from financing obligations   3  
Net cash used in financing activities (452 ) (587 )
 
Net decrease in cash and cash equivalents (473 ) (225 )
Cash and cash equivalents at beginning of period 1,407   971  
Cash and cash equivalents at end of period $ 934   $ 746  

Contacts

Kohl’s Corporation
Investor Relations:
Wes McDonald, Chief Financial Officer, (262) 703-1893
or
Media:
Bevin Bailis, SVP, PR and Communications, (262) 703-1464

Contacts

Kohl’s Corporation
Investor Relations:
Wes McDonald, Chief Financial Officer, (262) 703-1893
or
Media:
Bevin Bailis, SVP, PR and Communications, (262) 703-1464