Kohl's Expands, Opens Stores - Analyst Blog

In order to continue its focus on growing market share in a challenging economy, Kohl's Corporation (KSS) has opened 30 new stores in 20 states, adding approximately 4,000 new jobs.

With this, Kohl’s now operates 1,127 stores in 49 states.

In addition to adding new stores, Kohl’s has also invested in its current store base by adding innovative features. The company has remodeled approximately 100 stores in 2011, an 18% increase from 2010.

The additional features include updated check-out stations, upgraded fitting rooms, a customer service area relocated to the front of the store in most locations, in-store e-commerce kiosks and electronic signage.

Kohl’s also remains focused on the small store concept, which offers better real estate flexibility and provides a platform to open more stores faster.

Kohl’s posted operating earnings of $1.09 per share for the second-quarter 2011, beating the Zacks Consensus Estimate by a penny. The earnings also surpassed the prior-year quarter earnings by 30%.

Profits were largely driven by prudent expense management across many of its stores. Strong profitability in the credit card partnership with Capital One Financial Corp. (COF) helped as bad debt expenses declined significantly during the quarter compared to last year.

Kohl’s has had a consistent merchandise mix over the past three years. In addition, the company’s pricing strategy and overall profitability culture are focused on maintaining a low-cost structure.

A strong balance sheet coupled with strong cash balance and attractive dividend yields makes the stock attractive.  However, some mid-priced retailers are struggling to combat rising input costs. Kohl’s also faces increased competition from Target Corp. (TGT), which is a concern.

Kohl’s holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Currently, we maintain a long term Neutral recommendation on the stock.

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