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Kohl's Corp KSS
Q3 2012 Earnings Call Transcript

Transcript Call Date 11/08/2012

Operator: Good morning. My name is Marley and I will be your conference operator today. At this time, I'd like to welcome everyone to the Kohl's Quarter Three 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 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 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 in 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.

Also, please note that replay of this recording will not be updated. So, if you're listening after November 8, it is possible that the information discussed is no longer current.

I would now like to turn the call over to your host, Wes McDonald, Senior Executive Vice President and Chief Financial Officer. Sir, you may begin your conference.

Wes McDonald - SEVP and CFO: Thank you. With me today is Kevin Mansell, our Chairman, CEO and President. I'm going to go over our financial results and Kevin will talk about some more specifics regarding merchandising, marketing, stores and then I'll follow up with our guidance.

Total sales for the quarter increased 2.6% to $4.5 billion. Comp store sales increased 1.1%. The comp increased reflects a 0.6% increase in average unit retail, a 1% increase in units per transaction resulting in a 1.6% increase in average transaction value and a 0.5% decrease in number of transactions per store.

Year-to-date sales increased 1.2% to $12.9 billion and comparable store sales decreased 0.5%. The year-to-date comp decrease reflects a 3.9% increase in average unit retail offset partially by a 2.2% decrease in units per transaction, which results in average transaction value of positive 1.7%. Transactions per store for the year are down 2.2%.

E-Commerce sales increased 50% over the third quarter of 2011 to $295 million. Year-to-date, E-Commerce sales have been $782 million, 41% higher than the first nine months of 2011. The effect on our comp was 230 basis points for the quarter and 190 basis points year-to-date. Kohl's charge sales penetration increased 70 basis points to 58% of total sales for the quarter and our year-to-date credit share is 57%, an increase of 165 basis points over the first nine months of the year. Kevin will provide more color on sales in a few minutes.

Our gross margin rate for the quarter was 38.1%, 44 basis points lower than the third quarter of last year, but considerably better than our expectations of 60 to 80 basis points decline. SG&A dollars increased to 0.6% for the quarter, consistent with our expectations of down 1% to up 1%. SG&A as a percent of sales leveraged approximately 50 basis points for the quarter and 40 basis points year-to-date. Kevin will provide some more color on expense management as well in a few minutes.

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