Kohl's Changes the Calendar and Hands Out Cards
By Herb Greenberg
Senior Columnist
11/16/2001 12:50 PM EST
Briefly:
Kohl's capers: Everybody loves Kohl's (KSS:NYSE - news - commentary - research - analysis) , no stranger to this column, which has at times noted the deteriorating quality of its comparable-store sales, when viewed from the standpoint of slowing sales per store week.
Well, the company warns on its conference call that all bets will be off on comp-store sales this month; they'll rise 20% -- not because of improved business, but because of a changed calendar. (You think anybody will remember the reason for the rise?! Better hope so, because in December, the company warned, comps will be negative.)
But that's only part of the story. Kohl's is increasingly snaring sales through the Kohl's credit card, thanks to aggressive incentives. Last quarter, according to the call, card sales represented 35.3% of revenues, compared with 31% in the second quarter. What's more, in 2000, interest income and fees from credit cards generated 17% of pretax earnings. Not a bad way to goose sales. But that's assuming Kohl's is adequately reserved for any bad debt. That's unclear; it's still reserving at 1.2% of card sales. Compare that with Sears (S:NYSE - news - commentary - research - analysis), which last quarter raised its reserve for bad card debt to 9% from 4.5%. Different companies, sure, but if the trend keeps up, pretty soon you might start asking if Kohl's is a growth retailer or an increasingly risky credit card company. |
