Kohl's quarterly profit beats on higher margins

Shoppers at a Kohl's store in Jersey City, NJ.
Nicole O'Hara | CNBC

Department store operator Kohl's followed larger rival Macy's in reporting a better-than-expected quarterly profit, helped by higher margins despite a drop in sales during the crucial holiday selling season.

Shares of Kohl's were up about 2 percent at $42.55 in premarket trading.

Both Macy's and Kohl's reported weak sales for November and December as they struggle to overcome stiff competition from Amazon.com and weak demand for clothes and accessories.

However, Kohl's likely had to discount less in the fourth quarter than rivals as it entered the holiday season with low inventories, analysts had said.

"We saw improvement in merchandise margin, and our team continued to manage inventory and expenses extremely well," Kohl's Chief Executive Kevin Mansell said in a statement.

Gross margin rose to 33.4 percent from 33.1 percent in the quarter, and inventories were down 6 percent.

Macy's reported a higher-than-expected quarterly profit on Tuesday, helped by the sale of some of its stores and lower costs and taxes but said it would post another year of sales declines.

Kohl's said on Thursday that its full-year sales could fall 1.3 percent or grow 0.7 percent, which translates to sales of $18.44 billion-$18.82 billion. This came in largely below the average analyst estimate of $18.70 billion.

Sales at Kohl's stores open at least a year fell 2.2 percent, in line with analysts' average estimate from research firm Consensus Metrix.

Net income fell about 15 percent to $252 million, or $1.44 per share, in the quarter ended Jan. 28, from a year earlier.

Analysts on average had expected earnings of $1.33 per share, according to Thomson Reuters I/B/E/S.

Net sales dropped 2.8 percent to $6.21 billion, falling for the fourth straight quarter. Analysts had expected revenue of $6.22 billion.

The company forecast earnings of $3.50 to $3.80 per share for the year ending January, the midpoint of which topped analysts' estimate of
$3.64 by a cent.