Aug 27 (Reuters) - Kohl's raised its annual profit forecast on Wednesday as the U.S. department store chain's years-long turnaround reduces costs and its fresher product line-up brings back customers, sending its shares up 27% in early trading.
The company also reported a second straight quarter of sales beat as efforts to reassess its product assortment pay off, despite three CEOs in as many years, with the latest leaving just after 100 days.
Kohl's is offering more coupons for branded products, introducing fresher items in its cheaper store labels to keep its lower and middle-income customers engaged at a time when tariffs and inflation have squeezed household budgets
The company now expects annual earnings per share of 50 cents to 80 cents, compared with its earlier wide range of 10 cents to 60 cents.
"The topline beat gives management some breathing room, but Kohl's is still stuck in the squeezed middle of retail — forced to discount heavily to move product while struggling to articulate a clear brand identity," said EMarketer analyst Suzy Davidkhanian.
Signaling the stress, the company said on Tuesday it was reworking its vendor payment terms after a Bloomberg News report.
Kohl's shares, which have a high level of short interest, have lost about 32% over the last five years as department store chains struggled against intense competition from cheaper options online, as well as at discount stores.
"These results have probably convinced some people that Kohl's isn't in danger of financial distress, and they are covering their shorts," said David Swartz, analyst at Morningstar Research.
Shares of rival Macy's, set to report quarterly results next week, were up 2.5%.
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Kohl's closed an e-fulfillment center in Ohio earlier this year, and is pruning its jewelry and women's apparel business to include fresher products.
"We were able to expand our gross margins, reduce our inventory, and lower our expenses, leading to solid second-quarter earnings," said interim CEO Michael Bender.
Selling, general and administrative expenses fell 4.1% from a year earlier, following a 5.2% drop in the first quarter.
Kohl's adjusted earnings per share of 56 cents for the quarter ended August 2 raced past estimates of 29 cents, according to data compiled by LSEG.
Comparable sales fell 4.2%, smaller than estimates of a 5% decline, while net sales also topped expectations.
The Wisconsin-based company also tightened its forecast for annual and comparable sales, while raising its operating margin target for 2025.
Reporting by Juveria Tabassum and Sanskriti Shekhar; Editing by Sriraj Kalluvila
Source: Reuters