Kohl's Corp KSS
Q3 2011 Earnings Call Transcript

Transcript Call Date 11/10/2011

Operator: Good morning. My name is Brandy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kohl's Quarter Three 2011 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

Certain statements made on this call including projected financial results are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Kohl's intends forward-looking terminologies such as believes, expects, may, will, should, anticipate, 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 in forward-looking statements. Such risks and uncertainties include, but are not limited to, those that are described in Item 1A and Kohl's most recent Annual Report on Form 10-K/A and as may be supplemented from time-to-time in Kohl's other filings with the SEC, all of which are expressively incorporated herein by reference.

Also, please note that replays of this call will be available for 30 days, but this recording will not be updated. So, if you are listening after November 10th, it is possible that the information discussed is no longer current. Thank you.

I will now turn the conference over to Wes McDonald, Senior Executive Vice President and Chief Financial Officer.

Wes McDonald - SEVP and CFO: I'll start again with financial performance. Total sales for the quarter increased 3.8% to $4.4 billion. Comparable store sales for the quarter increased 2.1%. average transaction value increased 5.2% and reflects a 9.5% increase in average unit retail and a 4.3% decrease in units per transaction. Number of transactions per store decreased 3.1%. Year-to-date, sales have increased 3.5% to $12.8 billion and comparable store sales have increased 1.7%. Average unit retail increased 6.2% and units per transaction decreased 3.9%, resulting in average transaction value increase of 2.3%. Number of transactions per store decreased 0.6%. Kevin will provide more color on our sales by region and line of business in a few minutes.

Our credit share was 57% for the quarter and is 55% for the year, an increase of approximately 430 basis points over the third quarter of 2010 and approximately 540 basis points over the first nine months of 2010. Our gross margin rate for the quarter was 38.6%, 10 basis points higher than the third quarter of last year and at the high-end of our expectations. Year-to-date, our gross margin rate increased almost 20 basis points to 39.1%. Our fourth quarter expectations are consistent with our previous expectations for the third quarter, down 10 basis points to up 10 basis points over last year.

SG&A increased 1.1% for the quarter, below our expectations of a 1.5% to 3% increase. More importantly, SG&A as a percent of sales leveraged 66 basis points for the quarter. The most significant leverage came for our credit and store organization. Advertising did not leverage due to planned incremental spending to drive customer traffic and support the Jennifer Lopez and Marc Anthony launches. We would expect SG&A expenses to increase 5% to 6% for the fourth quarter, due in part to increased advertising spend to drive holiday traffic.

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