(Reuters) - Department store operator Kohl’s Corp (KSS.N) reported better-than-expected quarterly net sales and profit on Thursday due to strong back-to-school sales, a day after Macy’s (M.N) full-year forecast cut raised concerns about the sector’s performance.
J. C. Penney reports on Friday, while Nordstrom reports after the bell on Thursday.
Macy’s cited lower discretionary spending and a strong dollar that discouraged tourists from spending at its most profitable stores for its poor results.
Kohl’s, unlike Macy’s, is not dependent on tourist spending and has carved a niche by positioning itself as a pure mid-tier retailer.
Initiatives such as tailoring merchandise to suit the preferences of local customers and offering more on-trend products boosted sales in the quarter.
Kohl’s said it is benefiting from improved marketing, investing more in its online business and from higher sales of women’s apparel, especially in the plus-size category.
Shoppers delayed buying back-to-school items to August, from the traditional start in July, and this benefited Kohl’s third quarter instead of the second, said Neil Saunders, chief executive officer of retail research firm Conlumino.
“Taking this benefit into account suggests that the pace of growth is somewhat soft,” he said.
Saunders said he expects the company to benefit from its opening of five to ten smaller 35,000 square foot stores in underserved locations and stores selling Kohl’s proprietary brands, such as FILA.
However, Kohl’s warned that warmer-than-usual weather could dent current-quarter results, but maintained that it would meet the low end of its $4.40-$4.60 per share profit forecast for the year ending January.
Kohl’s reported a 5 percent rise in inventory units per store in the third quarter, despite placing fewer orders, due to the warm weather.
The company said it aimed to bring inventory to 2-3 percent levels in the current quarter.
Macy’s said on Wednesday it will have to liquidate its excess inventory through discounts to bring in fresh merchandise.
Kohl’s same-store sales rose 1 percent in the third quarter, in line with analysts’ estimate.
Net income fell 15.5 percent to $120 million, or 63 cents per share, in the quarter ended Oct. 31.
Excluding items, Kohl’s earned 75 cents per share.
Net sales rose 1.2 percent to $4.43 billion.
Analysts on average had expected earnings of 69 cents per share on revenue of $4.40 billion, according to Thomson Reuters I/B/E/S.
Kohl’s shares were up 6.5 percent at $46.00 in afternoon trading.
Department store earnings (here)
Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Savio D'Souza and Maju Samuel