On Thursday, Kohl Corporation brought down the profit forecast, on the basis on the new credit card rules coming to effect and a drop in the sales of cards.
Kohl, the profits for which increased by 5 percent in the first half of the current fiscal year, reduced their profit forecast for the second half of the year fearing the impact of the new credit card rules to the business. The current profit forecast stands at 2 percent to 4 percent.
The department store also went on to say that the new laws introduced by the federal government aimed at various credit cards fees, terms and conditions and a communication campaign to make customers aware about the changes brought about will bring down the income by close to $40 million in the third and fourth quarters of the current fiscal year.
The Chief Financial Officer of Kohl Corporation, Wes McDonald, said that in addition to the customer awareness campaign, they will also have to make certain technological investments and also train their existing staff at the online order processing center, the cost of which will eat into the profits in the second half.
Kohl has significantly reduced the share price forecast for the complete year and currently places it at $3.57 to $3.70 per share as compared to the $3.76 per share forecast by Wall Street. The company said that the reason for them to decrease the forecast was the 11% increase in expenses added to a further 4 percent increase in the final quarter.
Kohl also mentioned that as against the 74 cents forecast for the third quarter, they expected an increase of only up to 63 cents per share. The company also mentioned that that the net income increased to $260 million which is an increase of 13.5% which is equivalent to an increase of at least 84 cents per share. The revenue earned and the profits made surpassed the expectations of the analysts.
The sales made by same stores or stores that opened doors at least twelve months ago increased by 4.6%. Despite the shoppers purchasing lesser during each visit, the number of transactions recorded were significantly higher.
The shares of Kohl fell by $1.28 to stand at $46.50. Their competitors J C Penny, Macy and Dillard`s also saw a drop in the share prices last Friday. In a move that could increase its revenue, Kohl have entered into a collaboration with Capital One to provide private label cards to its customers.