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Kohl’s Q1 profit, sales easily top Street; lifts forecast

Kohl’s posted a strong performance in its first quarter amid improved inventory management and ongoing efforts to improve store traffic and court millennials.

Kohl's reported net income of $75 million, or 45 cents a share, for the quarter ended, compared to $66 million, or 39 cents a share, for the year-ago period. Excluding $500 million in debt Kohl's paid down the past quarter, the company earned $107 million, or 64 cents a share. Analysts had forecasted earnings of 50 cents a share.

Sales rose 3.5% to $4.21 billion over the same quarter a year prior, higher than the $3.95 billion analysts were expecting. Same-sales sales were up a better-than-expected 3.6%, boosted by a scheduling shift of a friends and family promotional event.

Kohl’s has undertaken a number of initiatives to boost traffic, including a partnership with Amazon to accept returns at select Kohl’s locations for the online giant. It recently announced a deal to lease unused space within Kohl's stores to grocery discounter Aldi.

In addition, Kohl’s has been working to increase its appeal to millennials, most recently announcing a new women’s apparel collection in partnership with the hip global media/tech firm, PopSugar. Analyst Neil Saunders, managing director of GlobalData Retail, said that its efforts appear to be gaining ground.

“High profile developments such as the partnership with Amazon have helped to put Kohl's more firmly on the radar of the younger shopper,” he noted. “However, it is fair to say that the assortment has not always been squarely aimed at this cohort, which means conversion rates from visiting to purchasing have been low. We are encouraged to see that Kohl's is now making more decisive moves to address this, including the launch of an exclusive new apparel collection with PopSugar in fall. This is a smart move and one that has echoes of Target's various partnerships with notable brands.”

In addition to reporting its financials on Tuesday, Kohl’s announced it is reinventing its loyalty strategy by taking the best elements of its three rewards programs and rolling them into one, with a program called Kohl’s Rewards.

In a statement, Kohl’s CEO Michelle Gass noted that the recently-ended quarter was the chain’s third consecutive quarter of positive comparable sales, which increased on both a fiscal and a shifted basis. Gass took the reins as CEO at Kohl’s annual shareholders meeting on May 16, succeeding the retiring Kevin Mansel.

“Further, we exceeded the high end of our margin expectations through continued focus on inventory management, while expenses were consistent with our expectations as we continue to make investments to ensure our long-term success,” Gass said.

Kohl's raised its earnings forecast for the year, and now expects earnings of $5.05 to $5.50 per share, compared with previous expectations of $4.95 to $5.45 per share. Including the impact of debt payment, to earn between $4.86 and $5.31 per share a year ago.
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