Kohl's edges up; outlook falls short

By Phil Wahba

NEW YORK (Reuters) - Department store operator Kohl's Corp (KSS.N) reported a larger-than-expected quarterly profit on Thursday but forecast results for the holiday season below Wall Street estimates.

Chief Executive Kevin Mansell told Reuters he expects consumers to remain cautious in their holiday shopping, so the company is looking at new areas in which to offer exclusive brands, such as men's apparel and women's accessories.

"We recognize that in a lower spending environment that this is going to be all about winning market share," he said in an interview.

Top department store chains are trying to tone down expectations for a major consumer comeback during the holidays.

On Wednesday, shares of Kohl's rival Macy's Inc (M.N) fell 8.1 percent as its projections for the final quarter of the year disappointed Wall Street.

Kohl's shares fell 3 percent on the Macy's report and were slightly higher on Thursday.

Kohl's said net profit rose 20 percent to $193 million, or 63 cents a share, in the third quarter that ended October 31, from $160 million, or 52 cents a share, a year earlier.

Analysts' average estimate was 61 cents per share, according to Thomson Reuters I/B/E/S.

Sales rose 6.5 percent to $4.1 billion, just above analysts' average estimate of $4.0 billion. Sales at stores open at least a year were up 2.4 percent.

Sales growth was fueled by higher-margin exclusive brands, which include the Simply Vera Wang and Dana Buchman women's clothing lines and made up 45 percent of sales during the quarter.

Kohl's forecast earnings of $1.14 to $1.24 per share for the fourth quarter. Analysts on average were expecting $1.25.

The company expects sales to rise 3 percent to 6 percent in the fourth quarter, with same-store sales ranging from a 1 percent decline to a 2 percent gain.

Kohl's shares were up 10 cents to $54.69 in afternoon trading on the New York Stock Exchange.

AN OUTPERFORMER

The strength of Kohl's brands and its price positioning in the recession have protected it, an analyst said.