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Kohl’s Q3 tops Street but outlook disappoints

Kohl’s Corp. on Tuesday reported sales and earnings that beat analysts’ expectations and the chain boosted its earnings forecast — but not as much as the Street would have liked.

Kohl’s earned $161 million, or 98 cents a share, in the period ended Nov. 3, topping Street estimates by two cents and up from $117 million, or 70 cents a share, in the year-ago period.

Net sales inched up 1.3% to $4.369 billion, slightly ahead of expectations. Total revenue was $4.63 billion. Same-store sales rose 2.5%, the chain’s fifth consecutive quarter of comp-sales increases.

“We experienced strength across our entire apparel business, and our focus on speed to market and inventory management are driving relevancy with our customers, resulting in sales growth, margin expansion, and clean inventory levels,” said Michaelle Gass, CEO, Kohl’s. “We are executing extremely well in our stores and our digital channels, and our efforts across the company have us well-positioned going into the fourth quarter.”

Analyst Neil Saunders, managing director of GlobalData Retail, commented that Kohl’s same-store gains are directly related to the various strategies management has deployed to make its stores and assortments more compelling for shoppers, particularly in the clothing category where the chain has stepped up its own-brand development, especially in womenswear.

“It’s also worth noting the effort Kohl's has put into thinning out the ranges in stores and making the assortment easier to shop,” Saunders added. “Although stores can be messy at times, they are far less cramped and crowded with products than they once were. Not only does this make browsing more pleasant, it also elevates the proposition and allows Kohl's to showcase key brands more effectively. The work to improve store merchandising stands in direct contrast to retailers like J.C. Penney where consumers are still greeted by a sea of merchandise.” For more analysis, click here.

The retailer raised its guidance and said it now expects fiscal 2018 diluted earnings per share to be $5.16 to $5.36, compared to its prior guidance of $4.96 to $5.36. Excluding the loss on extinguishment of debt, fiscal 2018 diluted earnings per share is expected to be $5.35 to $5.55, compared to prior guidance of $5.15 to $5.55. Analysts had been looking for earnings per share of between $5.12 to $6.00.
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