Despite the decrease in sales, the company experienced an improvement in gross margin, which rose to 38.9 per cent, an increase of 158 basis points from the previous year. This growth in gross margin reflects the company's efforts in improving profitability amidst declining sales.
However, selling, general, and administrative expenses presented a challenge, increasing by 1.9 per cent YoY to $1.4 billion. This represents 33.5 per cent of total revenue, marking an increase of 235 basis points compared to the previous year, the company said in a media release.
Operating income for the quarter was reported at $157 million, down from $200 million in the prior year. This resulted in a decrease in operating income as a percentage of total revenue to 3.9 per cent, a drop of 82 basis points YoY (YoY).
Net income for Q3 FY23 stood at $59 million, or $0.53 per diluted share, a decline from $97 million, or $0.82 per diluted share, in the previous year. The company also reported a significant reduction in inventory levels, which were down by 13 per cent YoY, to $4.2 billion.
Operating cash flow for the quarter was $151 million, reflecting the company's cash management strategies.
Looking at the first nine months of FY23, Kohl's net sales decreased by 4.5 per cent YoY to $10.9 billion, with comparable sales down by 5 per cent. The gross margin as a percentage of net sales slightly improved to 39 per cent, an increase of 56 basis points.
Selling, general, and administrative expenses for the nine-month period slightly decreased by 0.2 per cent YoY to $3.9 billion. However, as a percentage of total revenue, these expenses increased to 33.9 per cent, up 150 basis points from the previous year.
Operating income for the first nine months was $418 million compared to $548 million in the prior year, a decrease in operating income as a percentage of total revenue to 3.6 per cent, down 91 basis points YoY. Net income for the period was $131 million, or $1.18 per diluted share, compared to $254 million, or $2.02 per diluted share, in the previous year. The operating cash flow for the first nine months was $379 million.
“Kohl’s third quarter earnings reflect strong gross margin and expense management as well as additional progress against our strategic priorities. This reinforces our actions are working and resonating with our customers. In addition, we drove a 13 per cent reduction in inventory as we benefited from our new disciplines,” said Tom Kingsbury, Kohl’s chief executive officer.
Fibre2Fashion News Desk (DP)