* Target Q4 EPS $1.43 vs Street view $1.40
* Target sees FY 2012 EPS $4.05-$4.25
* Kohl's sees FY same-store sales up 2 pct
* Dillard's net rises 29 pct
* Target shares up 2.5 pct, Kohl's shares down
By Phil Wahba
Feb 23 Department-store operator Kohl's
Corp on Thursday gave a profit forecast that came in
below Wall Street expectations this year as customers balked at
its attempts to pass on rising costs, while Target Corp
said it would be helped by its credit card business.
Results and forecasts from those two retailers showed that
consumers at the low to mid-end of the U.S. economy are
pressured by rising gasoline prices and still high unemployment
even as Dillard's Inc, which caters to a more affluent
customer, posted better sales during the holiday quarter.
Both Kohl's and Target tried to protect margins as best they
could during the holiday quarter by not slashing prices beyond a
certain point, but that came at the cost of disappointing sales
for both retailers.
"We did see resistance from our customer," Kohl's Chief
Executive Kevin Mansell told analysts on a conference call,
referring to prices hikes put in the place to counteract higher
That cost the company customers, leading to same-store sales
falling 2.1 percent over the holiday quarter despite a
stepped-up advertising campaign.
Kohl's may have little choice but to relent on those price
"They absolutely have to stand out as the promotional
department store that they are," said Matt Arnold, an analyst
with Edward Jones.
Kohl's said it expects same-store sales to be up 2 percent
this year, while Macy's on Tuesday forecast a 3.5 percent gain.
It also said online sales passed $1 billion last year. But
those sales came at the expense of those at its brick-and-mortar
stores. As a result, it plans to slow the pace of new store
openings and shift some of its capital expenditure to its online
Kohl's said it would earn $4.75 per share in fiscal 2012,
below the $4.95 that Wall Street analysts were projecting. It
Kohl's forecast gross margin would fall 1.6 percentage points
in the current quarter compared with a year ago
Kohl's shares were down 5.8 percent to $49.17 in afternoon
trading, while Dillard's were up 9.2 percent. Target shares were
up 2.4 percent.
Target got some relief from the growing popularity of its
debit and credit cards that give shoppers a 5 percent discount.
And after a tough holiday season, the discounter said sales
trends are returning to normal. It expects same-store sales to
be up 3 percent this year.
The trendy discounter was largely able to contain the damage
to its gross margin, which edged down 0.3 percentage point to
28.4 percent of sales, helped by more sales rung up through its
credit and debit card rewards. The erosion to gross margin was
more moderate than what analysts expected.
Customers continued to respond to Target's credit and debit
cards. Target said 10.8 percent of sales were made using those
cards, compared with 7.4 percent a year earlier, and it expects
that percentage to rise again this year.
"We expect U.S. momentum to improve following a
disappointing holiday season," said Bernstein Research analyst
Colin McGranahan, noting that Target shares were undervalued.
Target expects to earn between $4.05 and $4.25 per share
this year, compared with analyst expectations of $4.27. But
without costs associated to its expansion into Canada, with the
first stores there set to open next year, earnings would be 50
cents per share higher.
Target previously said fourth-quarter sales rose 3.3 percent
to $20.94 billion. Sales at stores open at least a year, or
same-store sales, rose 2.2 percent, down from a 2.4 percent rise
during the year-earlier holiday season.
Separately, Dillard's Inc reported net income during
the holiday quarter rose 29 percent to $141.5 million, helped in
part by a gross margin from its retail operations edged up 0.3
points to 35.9 percent.
Dillard's saw its margins rise and same-store sales rise 3