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Kohl’s tops Street in Q4; in new co-location partnership

BY Dan Berthiaume

Kohl’s Corp. is teaming up with one of the fastest-growing fitness companies in the United States.

The retailer on Tuesday reported sales and profits that topped Wall Street projections. It also announced a partnership with Planet Fitness with the fitness operator opening up to 10 Planet Fitness locations “adjacent” to select Kohl’s stores across the country in 2019, with the opportunity for additional locations in the future. Under the partnership, Planet Fitness will lease approximately 20,000 sq. ft. – 25,000 sq. ft. that were previously part of the Kohl’s stores.

This is not the first time Kohl’s has downsized its stores and leveraged the space to an outside tenant. The retailer previously said it would reduce the size of up to 10 stores and lease the newly opened space to the German discount supermarket chain Aldi. It also is piloting a variety of health and wellness offerings with WW (Weight Watchers) that include the debut of the first WW Studio at Kohl’s. The 1,800-sq.-ft. space will be located inside a Kohl’s store in Chicago.

“We continue to see our rightsizing strategy as an important initiative to not only leverage our real estate assets but also drive traffic to our stores through key partnerships,” said Michelle Gass, Kohl’s CEO on the company’s fourth quarter earnings call held this morning. “We see the rightsizing strategy as a large opportunity for Kohl’s.”

Kohl’s total revenue fell 3.3% to $6.82 billion in the quarter ended Feb.2, easily beating the $6.58 billion predicted by Wall Street analysts. Same-store sales inched up 1%, more than analysts had expected.

Net income fell 42% to $272 million, or $1.67 a share, from $468 million, or $2.81 a share, during the year-ago period. Adjusted earnings came in at $2.24 per share beating analysts’ projections of $2.18 per share.

“With a clear focus on driving traffic and operating with discipline, the company is delivering sales growth while also improving profitability,” Gass said. “We are financially strong and our overall health in the business is positioning us well for continued success.”

Kohl’s will close four underperforming stores in April, but will open four new smaller format stores later in the year. It is consolidating call center locations which support both its Kohl’s charge and online customers.

“The push into smaller store formats is critical as it allows Kohl’s to improve productivity, especially as it shuts some of its underperforming older stores,” commented Neil Saunders, managing director, GlobalData Retail. “The ongoing streamlining of the fleet is important in keeping the bottom line healthy at a time when more sales are migrating to digital.” For more analysis, click here.

Kohl’s released initial fiscal 2019 earnings guidance of earnings per diluted share of $5.80 to $6.15 for fiscal 2019. Analysts were expecting $5.77 per share.

Kohl’s ended the fiscal year with 1,159 Kohl’s stores in 49 states. During 2018, the company opened one Kohl’s store and relocated two Kohl’s stores.

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