Kohl's profit beats as sales up, raises year view

NEW YORK Thu May 14, 2009 4:09pm EDT

The sign outside the Kohl's store in Westminster, Colorado August 14, 2008. REUTERS/Rick Wilking

The sign outside the Kohl's store in Westminster, Colorado August 14, 2008.

Credit: Reuters/Rick Wilking

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NEW YORK (Reuters) - Kohl's Corp (KSS.N) posted a lower quarterly profit on Thursday but just beat Wall Street's expectations as the department store operator managed to show a slight increase in sales despite persisting consumer thrift.

The retailer also raised its full-year profit forecast, citing its first-quarter results. Its shares closed down 1.7 percent, after rising as much 4.7 percent earlier.

Kohl's typically sells lower-priced items than other department stores and often uses discounts to lure shoppers.

Its higher sales stood out among peers, which have all faced a tough time in getting consumers to spend as they contend with the recession, job losses and tight access to credit.

Macy's Inc (M.N), for instance, posted a 9.5 percent drop in first-quarter sales a day earlier, and stuck to its forecast for sales to fall for the full year.

The pain has extended to even upscale retailers. Nordstrom Inc (JWN.N), which will report results later in the day, also expects a quarterly sales decline.

Where they do spend, consumers have sought deep discounts -- a trend that is likely to persist and help Kohl's, said Liz Dunn, a Thomas Weisel analyst.

"We've all learned that many consumers were spending much more money than they could afford," she said. "A more value-conscious consumer is likely to persist for some time so Kohl's will continue to be well-positioned from that standpoint."

Chief Executive Kevin Mansell said during a conference call that the company will "continue to highlight the many ways" the consumer can save while shopping at Kohl's.

Meanwhile, the world's largest retailer, Wal-Mart Stores Inc (WMT.N), whose low prices have enticed shoppers in the economic slump, posted a roughly flat quarterly profit.

PROFIT BEAT

Kohl's net profit fell to $137 million or 45 cents per share, for its first quarter, ended May 2, from $153 million, or 49 cents per share, a year earlier.

Analysts, on average, expected 44 cents per share, according to Reuters Estimates.

Sales rose about 0.4 percent to $3.64 billion.

Kohl's said it managed its inventory closely, leading it to have less discounted merchandise in stores.

The company still expects to open 56 stores and remodel about 51 stores this fiscal year. A majority of the new stores are former Mervyns locations, which Kohl's acquired after Mervyns went bankrupt last year.

Retailers are using different tactics they hope will keep shoppers coming back despite the downturn. Kohl's is selling exclusive brands from designers and celebrities, such as Dana Buchman and Lauren Conrad, while J.C. Penney (JCP.N) touts its own brands like Fabulosity by Kimora Lee Simmons.

Macy's, meanwhile, is tailoring its stores to fit local trends.

Exclusive brands, though higher-priced, were lending a boost, Mansell said in an interview.

For the second quarter, Kohl's expects to earn 56 cents to 64 cents per share, in line with analysts' expectation of a profit of 62 cents per share. It forecast second-quarter sales to be down 1 percent to 4 percent.

It also raised its full-year per-share profit forecast to $2.19 to $2.42, based on its first-quarter results. It had earlier expected $2.00 to $2.30 per share. Analysts expect $2.55 a share.

Kohl's shares closed down 71 cents, at $41.24, on the New York Stock Exchange after rising as high as $43.94 earlier.

(Reporting by Aarthi Sivaraman; Editing by Lisa Von Ahn, Gerald E. McCormick and Steve Orlofsky)

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