NEW YORK — Kohl’s Corp.’s sales of exclusive brands and tight inventory control helped its third-quarter profit rise 21 percent, the company said Thursday.
The results led the department-store chain to raise its full-year earnings guidance. But CEO Kevin Mansell said he expects consumers to “continue to be conservative” in their spending over the holidays.
Kohl’s has benefited from its expansion of exclusive brands like Dana Buchman, Simply Vera Vera Wang, and LC by Lauren Conrad, which launched in October, as well as cost-cutting.
“We continue to experience improvement in inventory management and increased penetration in ‘Only at Kohl’s’ brands,” CEO Kevin Mansell said in a statement.
He added that the company is accelerating the rollout of the LC by Lauren Conrad label from the 300 stores it occupies currently to all 1,059 stores nationwide in March, from an earlier goal of by next fall.
Navigating the rough economy has challenged Kohl’s and other department stores as shoppers keep spending low and worry about job security and tight credit. And while business is starting to improve for some as shoppers start to treat themselves a little, overall sales are still weak.
Mid-priced chain Kohl’s has fared better than higher-priced department stores amid the tentative economic recovery.
Many retailers have been cutting the inventory they carry. That helps them avoid having to mark down prices to clear out the merchandise as consumers have cut spending because of the weak economy.
Kohl’s said inventory per square foot is down 3 percent per store while clearance inventory is down 40 percent.
That “bodes well for continued strong margins in fourth quarter, said Stifel Nicolaus analyst Richard Jaffe in a note to investors.
Mansell said Kohl’s expects a holiday season that will be very competitive and focused on price.
“The consumer is extremely focused on stretching their dollar, making their budget go further, and seeking optimum value,” he said. “We fully expect competition to be aggressive on price. We intend to insure consumers view Kohl’s as giving the very best value this holiday.”
Profit for the three months ended Oct. 31 rose to $193 million, or 63 cents per share, compared with $160 million, or 52 cents per share last year.
Revenue rose 7 percent to $4.05 billion, from $3.8 billion a year ago. Analysts expected earnings of 61 cents per share on revenue of $4 billion, according to Thomson Financial.
Sales in stores open at least a year rose 2 percent. That’s considered a key measurement of a retailer’s health because it excludes the effects of store expansion.
Accessories, such as silver jewelry and handbags and footwear were the best sellers. Men’s, women’s and home products performed on par with overall sales and children’s and toys sales were weaker.
The Southwest was the strongest region, and the South Central and Southeast regions also had positive sales in stores open at least one year. The Midwest and Northeast were weakest.
Kohl’s, based in Menomonee Falls, Wis., raised its full-year earnings guidance to $2.98 to $3.08 per share, from previous guidance of $2.59 to $2.70 per share. Analysts expect a profit of $3.02 per share.
In the fourth quarter, it expects total sales to rise 3 percent to 6 percent, implying sales of $5.4 billion to $5.55 billion. Analysts expect sales of $5.57 billion.
The company expects a profit of $1.14 to $1.24 per share for the fourth quarter, just short of analyst predictions of $1.25 per share.
