Kohl’s issues weak forecast after steep 4Q profit decline

Kohl’s plans to close 18 stores, while pursuing new store formats including a foray into the outlet arena as the department store chain reinvents itself.

The strategy comes as department store chain, which operates more than 1,160 stores, issued a weak annual revenue forecast Thursday after posting a 20 percent drop in fourth-quarter profits.

The closures, although small, mark a rare retreat for a company that has never closed a multiple of locations at one time, Kevin Mansell, chairman and CEO of Kohl’s, told investors on a conference call on Thursday. And the moves show the challenges that Kohl’s and other department stores face as they rethink the type of stores it rolls out amid shifting shopping preferences. Shoppers are still spending, but they’re being very selective about it, spending more on home improvement and restaurants and less on apparel. And when they do want to buy fashion, they’re spending more time in stores like T.J. Maxx to grab fat discounts.

Department stores are also feeling the heat from the online leader Amazon.com.

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The fourth-quarter earnings results showed the continued struggles of department stores. Kohl’s said that revenue at stores open at least a year rose a slim 0.4 percent. Macy’s fell 4.3 percent, while Nordstrom’s full-priced stores saw that metric fall 3.2 percent. J.C. Penney is expected to release fourth-quarter results on Friday. Kohl’s joined Macy’s and Nordstrom in offering a weak outlook.

In a shifting retail environment, Kohl’s, Macy’s and other department stores are expanding online and they’re launching their own off-price stores. Kohl’s said it is planning to add two more Off-Aisle pilot stores in Wisconsin. The retailer also plans to open seven small-format stores throughout the country, and it will be testing 11 outlet stores under the Fila brand.

“We see exciting growth potential in the new stores and new formats that we are opening this year and are heavily investing in the health of our overall stores,” said Mansell in a company release.

Kohl’s, based in Menomonee Falls, Wisconsin, earned $296 million, or $1.58 per share. That’s 3 cents better the per-share projections from Wall Street, but well below last year’s earnings during the crucial holiday season of $369 million, or $1.83 per share.

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Revenue of $6.39 billion, also down, was in line with expectations.

For the year, the company reported profit of $673 million, or $3.46 per share. Revenue was reported as $19.2 billion.

Kohl’s expects full-year earnings to be $4.05 to $4.25 per share.

The company said annual total revenue could be anywhere from down 0.5 percent to up 0.5 percent.

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Kohl’s shares rose 81 cents, or 1.8 percent, to $46.27 in afternoon trading Thursday. Its shares are down almost 35 percent over the past year.