Kohl's profit beat lifts shares as partnerships pay off

[August 20, 2019]   By Aishwarya Venugopal

(Reuters) - Department store operator Kohl's Corp <KSS.N> reported better-than-expected quarterly profit on Tuesday and said it expected to benefit from new partnerships and the expansion of its Amazon returns program in the second half of the year.

A sign marks a Kohl's store in Medford, Massachusetts, U.S., February 21, 2017. REUTERS/Brian Snyder

Kohl's shares, which are down 27% so far this year, underperforming the S&P 500 index, were up nearly 5% at $50.54 in premarket trade.

Kohl's has been investing in several new partnerships to woo more shoppers. Last month, it expanded a returns program it launched with Amazon in 2017, through which items bought on the e-commerce website could be returned at Kohl's stores, generating additional sales for the retailer. Kohl's also stocks Amazon's Echo Dot speakers and Kindle e-readers at its stores.

The retailer has also teamed up with millennial-focused Popsugar to launch a new line of clothes and announced last week it would sell a selection of emerging brands online and in more than 50 stores, with Facebook helping it to identify trendy brands.

"Kohl's does not share the desperation of other department stores and has several things working in its favor," said Neil Saunders, managing director at GlobalData Retail, noting better store traffic thanks to Kohl's Amazon partnership.

Sales at stores open for at least a year fell 2.9% in the second quarter, more than a 2.5% drop expected on average by analysts, according IBES data from Refinitiv.

However, the company said that its comparable sales turned positive during the last six weeks of the second quarter with 1% growth, and maintained its fiscal 2019 adjusted profit forecast of a $5.15-$5.45 per share range.

"This positive trend has continued into August driven by a successful start to the back-to-school season," Chief Executive Officer Michelle Gass said in a statement. "We are confident that our upcoming brand launches, program expansions, and increased traffic from the Amazon returns program will incrementally contribute to our performance."

Department store rivals Macy's <M.N> and J.C. Penney <JCP.N> had a weaker quarter with Macy's cutting its annual profit forecast after missing Wall Street quarterly estimates and while J.C. Penney reporting a 9% slump in sales.

Kohl's has been reaping the benefits of higher investments in its private label brands, focus on athletic wear, better inventory management and fewer fashion missteps.

The company's net income fell to $241 million, in the quarter ended Aug. 3 from $292 million a year earlier but its earning per share excluding certain items came in at $1.55, beating analysts' forecast of $1.53.

Net sales dipped to $4.17 billion from $4.31 billion a year earlier, slightly missing expectations of $4.20 billion.

(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Tomasz Janowski)

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