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(Sharecast News) - US department store giant Kohl's reported better-than-expected third-quarter earnings and raised its full-year guidance for the second time this year on Tuesday, as improving margins, cost controls and early progress under newly-appointed chief executive Michael Bender helped stabilise the embattled chain.
The results, which extended a run of three consecutive quarterly beats, sent the retailer's shares sharply higher in early trading.
Net sales fell 2.8% to $3.4bn in the 13 weeks ended 1 November, while comparable sales declined 1.7%.
Although revenue continued to contract, the figures were materially better than analysts had expected, marking the widest top-line beat since 2021.
Adjusted earnings of 10cents per share compared with market expectations of a loss and exceeded last year's 20cents per share on a net-income basis, even as reported profit fell to $8m from $22m.
Gross margins improved by 51 basis points to 39.6%, supported by tighter inventory, improved mix and ongoing efforts to strengthen private-label ranges.
Bender, who became permanent CEO this week after serving in an interim capacity since May, said, "We are pleased with Kohl's third quarter results, marking a third consecutive quarter of delivering top-line and bottom-line performance ahead of our expectations.
"These results are a direct reflection of the progress we are making against our 2025 initiatives, reinforcing our confidence as we continue to move in the right direction."
He added that the company remained "committed to delivering quality products, great value, and a frictionless experience to our customers in an uncertain macroeconomic environment."
The improved performance came amid a broader shift in US consumer behaviour, with shoppers across income groups trading down and seeking bargains.
Off-price and discount chains had been outperforming as households contend with persistent inflation and a softening labour market, a trend analysts say was benefiting Kohl's.
The retailer had leaned more heavily into gifting, impulse categories and value-driven promotions as the holiday season started , including early access Black Friday deals.
Kohl's also continued to pare costs.
Selling, general and administrative expenses fell 2.1% to $1.3bn, while merchandise inventories tightened by 5% year-on-year.
Operating cash flow swung to an inflow of $124m from an outflow of $195m a year earlier, and borrowings under the revolving credit facility declined by $704m.
Following the stronger quarter, the company raised its 2025 outlook.
Adjusted earnings per share were now expected to range between $1.25 and $1.45, compared with a prior range of 50cents to 80cents.
Kohl's said it now forecast full-year net sales to decline 3.5% to 4%, an improvement from earlier expectations for a 5% to 6% drop, while comparable sales were projected to fall 2.5% to 3%.
Capital expenditure guidance remained unchanged at around $400m.
At 0918 ET (1418 GMT), shares in Kohl's Corporation were up 24.05% in premarket trading in New York at $19.55.
Reporting by Josh White for Sharecast.com.