Kohl's Corp KSS
Q2 2012 Earnings Call Transcript

Transcript Call Date 08/09/2012

Operator: Good morning. My name is Matthew and I will be your conference operator today. At this time, I'd like to welcome everyone to the Kohl's Q2 2012 Earnings Release 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 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 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 projected and such forward-looking statements. Such risks and uncertainties include, but are not limited to, those that are described in Item 1A in Kohl's most recent Annual Report on Form 10-K and as may be supplemented from time to time in Kohl's other filings with the SEC. All of which are expressed incorporated herein by reference.

I would now like to turn the call over to Wes McDonald, Senior Executive Vice President and Chief Financial Officer. Please go ahead.

Wes McDonald - SEVP and CFO: Thank you. With me today is s Kevin Mansell, Chairman, CEO and President. I'm going to take some time to go over the income statement and balance sheet and then I'll turn it over to Kevin to walk through some more specifics on our results related to merchandising, marketing and expense management and then I'll close up with guidance for the third quarter.

Total sales for the quarter decreased 1% to 4.2 billion. Comp store sales decreased 2.7%. The comp decrease was driven by transactions per store which were 4.5% lower than the second quarter last year. Average transaction value increased 1.8% on a 6.2% increase in average unit retail and a 4.4% decrease in units per transaction. Year-to-date sales increased 0.4% to $8.4 billion and comparable store sales decreased 1.3%. The year-to-date comp decline was also driven by transactions per store which declined 3.1%.

Average unit retail increased 5.5% while units per transaction decreased 3.7% resulting in a 1.8% increase in average transaction value. Kohl's charge sales penetration increased 160 basis points to approximately 57% of total sales for the quarter. Year-to-date credit share is 56%, an increase of approximately 215 basis points over the first half of 2011. Kevin will provide more color on our sales in a few minutes.

Moving on to gross margin, our gross margin rate for the quarter was 39%, approximately 160 basis points lower than second quarter of last year, but significantly better than our expectations of 200 to 250 basis point decrease. SG&A decreased 1.6% for the quarter, well below our expectations of flat to up 1.5%. SG&A as a percent of sales leveraged approximately 15 basis points for the quarter and 30 basis points year-to-date. Kevin will provide more color on expense management as well.

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