(Reuters) - Kohl’s Corp (KSS.N) on Thursday forecast that sales will rise during the holiday quarter and reported stronger-than-expected third-quarter profit, as business perked up later in the period for the department store chain.
The U.S. retailer, which competes most directly with Macy’s Inc (M.N) and J.C. Penney Co Inc (JCP.N) for middle-class shoppers, expects sales at stores open at least year, or same-store sales, will be up 3 percent to 4 percent in the quarter that includes the Christmas shopping period.
That would mark a major improvement over last year’s holiday period, when same-store sales slumped 2.1 percent, and would be inline with higher-end Macy’s forecast for a 4.2 percent jump.
Kohl’s, which has 1,146 stores, expects holiday quarter earnings of $2.00 to $2.08 per share, below the $2.16 Wall Street analysts had been expecting, according to Thomson Reuters I/B/E/S.
“That tells me they believe the environment is going to be a little more promotional,” Brian Yarbrough, consumer discretionary analyst for Edward Jones said, referring to the prospect of having to offer discounts and give up some profit margin to compete with rivals.
Kohl’s earlier this year frequently reported monthly sales numbers that disappointed Wall Street, which it blamed on its efforts to keep inventory lean to avoid having to sell unsold merchandise at deep discounts.
As a result, some popular items sold out. But many of its fashions aimed at young adults failed to find favor with shoppers, also hurting sales.
Kohl’s chief executive said in a statement that the retailer had made “investments” in inventory to offer a broader and more plentiful array of goods for the holiday season.
In October, the chain had more merchandise on hand, which helped Kohl’s report sales well above analyst projections, suggesting the retailer was putting that problem behind it.
Kohl’s posted a third-quarter profit of $215 million, or 91 cents per share, up slightly from $211 million, or 80 cents per share, a year earlier. That was 3 cents better than analyst projections.
The department store chain has been able to boost its earnings per share by buying back shares, and said its board raised its share buy-back program by $300 million to $3.5 billion.
Gross margin, which reflects the profitability of goods sold, fell half a percentage point to 38.1 percent.
As previously reported, same-store sales rose 1.1 percent in the third quarter, while overall sales rose 2.6 percent to $4.49 billion.
Reporting by Phil Wahba in New York; Editing by Gerald E. McCormick and Maureen Bavdek