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Analysis of Financial Condition and Results of Operations

Evaluates financial health and operational outcomes of an entity.

Benjamin Fisher
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Analysis of Financial Condition and Results of Operations - Page 1 preview imageAnalysis of Financial Condition and Results of OperationsEvaluate Kohl's financial performance for the years 2011-2013 by analyzingthe key factorsinfluencing its net sales, gross margin, and SG&A expenses. In your analysis, consider thecompany's strategic initiatives, including new brand launches, beauty departmentrenovations, loyalty programs, and omni-channel efforts. How did these initiatives affecttheir financial results, and what are the implications for their future financial outlook for2014?Word Count Requirement: 1,000-1,200 words
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Analysis of Financial Condition and Results of Operations - Page 2 preview image
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Analysis of Financial Condition and Results of Operations - Page 3 preview imageThefollowingtablesummarizesKohl’srecentfinancialresults:201320122011Netsales$19,031$19,279$18,804Changein:Netsales1.3%2.5%2.2%Comparablesales1.2%0.3%0.5%Grossmargin36.5%36.3%38.2%Selling,generalAndAdministrativeexpenses$4,313$4,267$4,243Netincome$889$986$1,167Netincomeperdilutedshare$4.05$4.17$4.30Treasurystockpurchases$799$1,259$2,331CashflowFromoperations$1,884$1,265$2,139Kohls main business objective is to profitably increase sales. In order to increase sales, Kohlsmust continue to increase transactions per store, which is its primary sales driver. To ensure this,Kohl’s have a number of initiatives which we at JC Penny believe will increase transactions perstore.Primarily, Kohls will have to continue to improve the quality of its merchandise and to continuetooffer items at great values.Kohls must continue to focus on creating excitement for its customer base in order to improvetraffic to its stores and website.In fiscal 2014, Kohls expect to launch several new brands, including Juicy Couture, IZOD, and aJumping Beans collection featuring Disney characters. The Juicy Couture assortment willinclude women's and girl's apparel, footwear, accessories, bedding, andhome accessories. TheIZOD assortment will be one of the largest men's launches in Kohls history and will featuremen's sportswear and dress apparel, including golf separates, woven sport shirts, sweaters, knit
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Analysis of Financial Condition and Results of Operations - Page 4 preview imageshirts, shorts, suit separates, dress shirts, and dress pants. The Jumping Beans collection willcombine Disney, one of the most recognizable brands in the world, and Kohlsown highly-successful Jumping Beans brand. Kohls will also launch the next DesigNation designer, ourlimited-time special collection.Approximately 280 of Kohlsstores had renovated beauty departments bythe end of fiscal 2013.Kohlsexpect to renovate the beauty department in approximatelyanother 200 stores in 2014.Theyarecurrentlytesting three different beauty renovations-new fixtures with expanded and/orrelocated floor space, new fixtures with no change to department size or location, and existingfixtures with acrylic retrofits. Initial test results are showing a significantincrease in beautysalesin the renovated stores.Kohls is also in the process of designing a rewards system to increase customer loyalty,especially for customers who don’t have a Kohls-branded credit card. This program will allowenrolled customer to earn various rewards or discounts based upon the volume of theirpurchases. The loyalty program is currently available in approximately 30% of its stores. Initialresults have been very positive. Kohls expect this loyalty program to be available in all of itsstores by the end of fiscal year 2014.Kohls is also making significant investments to create an exciting omni-channel shoppingexperience for its customers. Whether customers are shopping in one of its stores, from theirphones or from their laptops, Kohls will be creating a consistent experience to ensure that theircustomers can connect withone of manyKohl’s customer services representatives wherever andhowever they wish.Kohls seemed to haveremainedcommitted to meeting the changing shopping needs of thecustomer, from strengthening itsomni-channel experience to investing in thefuture in a strategicand profitable manner.2014 OutlookThe current expectations for fiscal 2014 compared to 2013 including estimated impacts of theseinitiatives are as follows:Total sales: Increase 0.5-2.5%Comparable sales: Increase 0-2%Gross margin as a percent of sales: Increase 10-30 bpsSG&A: Increase 1.5-2.5%Earnings per diluted share: $4.05-$4.45
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Finance

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