Kohl's forecast clouds solid quarterly results

Kohl’s Corp on Tuesday posted quarterly earnings and same-store sales above analysts’ estimates as it sold more apparel at full price, although the department store chain’s tepid profit forecast sent its shares down more than 4 percent.

Kohl’s raised its full-year adjusted profit forecast to a range of $5.15 to $5.55 per share, the mid point of which was still below the average analyst estimate of $5.39 per share, according to Thomson Reuters I/B/E/S.

While research firm Retail Metrics analyst Ken Perkins attributed the drop in shares to the company’s disappointing forecast, some others pointed to profit taking.

Kohl’s shares have risen more than 45 percent this year and have doubled in value in the past 12 months.

“Investors who have benefited from Kohl’s recent run may be taking some profits,” said Josh Blechman, director of Capital Markets at asset management firm Exponential ETFs said.

Kohl’s has beaten same-store sales and revenue estimates for the fifth straight quarter, highlighting its efforts to turn around its business by sprucing up stores, cutting back on discounts and bolstering its online operations.

In the latest quarter, the company benefited from higher sales of men’s and women’s apparel, especially in the active wear category with strong performance of brands such as Nike and Under Armour, Kohl’s said.

“The rebound in Kohl’s women’s business marks an important inflection point after multiple years of disappointing results,” Gordon Haskett analyst Chuck Grom said.

After years of stagnant growth, many U.S. department store chains, including Macy’s and Nordstrom, are turning a corner as they mount a challenge to Amazon.com Inc’s dominance by investing heavily in their online businesses and streamlining their operations.

“People still want to write retail apocalypse but it’s not happening,” said Bob Phibbs, chief executive officer of New York-based consultancy Retail Doctor.

Kohl’s said its expects the second half of the year to gain from liquidation of department store chain Bon-Ton Stores Inc
“We do expect to benefit in the back half, from store closures, in particular, with Bon-Ton closing the doors, especially, as we think about holiday,” Kohl’s CEO Michelle Gass said.

Sales at stores open for at least a year jumped 3.1 percent, compared with a 2.69 percent increase estimated by analysts.

With inventories per store down about 8 percent, Kohl’s gross margin rose 42 basis points to 39.5 percent in the second quarter ended Aug. 4.

Excluding one-time items, Kohl’s earned $1.76 per share, well above the average analyst estimate of $1.64, according to Thomson Reuters I/B/E/S.