Kohl's posts far better than expected profits as margins improve

Kohl’s Corp. shares jumped after the company posted far-better-than expected quarterly earnings, despite lowering its full-year outlook.

The US homeware and fashion retailer saw sales slip by 2.0% to $4.2bn over the three months to 30 July (consensus: $4.161bn), despite which earnings rose sharply as a result of better margins and lower overheads.

Wisconsin-based Kohl’s gross margins improved by 53 basis points to 39.5% while selling, general, and administrative costs declined 2% to $986m.

Kohl’s boss Kevin Mansell attributed the bigger gross margins to the company’s inventory management initiatives, with stocks down sharply when compared to year-ago levels.

That drove an 8% gain in net income to $140m, with earnings per share powering ahead by 17% to 77 cents or $1.22 - if non-recurring items are stripped out - versus the $1.07 achieved one year ago.

Analysts had only been anticipating adjusted EPS of $1.03.

In comparison to a year ago, Kohl’s whittled down the number of stores from 1,164 to 1,150.

The company lowered its full-year 2016 EPS guidance from between $4.05 to $4.25 to between $3.80 and $4.0, excluding impairments, store closing and other costs.

As of 16:12 BST Kohl’s stock was up by 13.54% to $43.19.