UPDATE 4-Kohl’s outlook disappoints, shares down

* Q1 EPS $0.64 vs Street’s $0.62

* Sees FY 2010 same-store sales up 3.5 pct-5 pct

* Issues Q2, fiscal 2010 forecasts that fall short

* Shares down 5.2 pct in afternoon trading

(Adds CEO interview, analyst comment)

By Phil Wahba

NEW YORK, May 13 (BestGrowthStock) – Department store chain Kohl’s
Corp (KSS.N: ) forecast second-quarter and full-year profits that
fell short of Wall Street expectations, saying it was not yet
convinced the economy was fully on the mend.

The retailer reported a profit on Thursday that beat analyst
estimates, but its top executives said they were not yet ready to
show too much optimism and preferred to be conservative in their
forecasts.

“We don’t want to get ahead of ourselves,” Kohl’s Chief
Executive Kevin Mansell told analysts on a conference call.

Mansell said Kohl’s would need to be flexible in its
inventory levels and cost controls and would hold off on
accelerating new store openings.

In a sign that caution may be justified, Kohl’s said that
shoppers’ average amount spent per transaction was down in the
quarter, a trend Macy’s Inc (M.N: ) also noted when it reported
its results on Wednesday. [ID:nN12173518]

U.S. government data released on Thursday on jobless claims
also pointed to a still-elevated jobless rate. [ID:nN13129786]

Shares of Kohl’s were down 5.2 percent in the afternoon, a
sharper drop than the 1.6 percent decline in the Standard & Poor’s
Retail Index (.RLX: ). Macy’s shares were down 3.8 percent and JC
Penney Co (JCP.N: ) stock was down 3.1 percent.

Kohl’s sees a second-quarter profit (Read more your timing to make a profit.) of 70 to 75 cents a
share, while the average Wall Street estimate was 88 cents per
share, according to Thomson Reuters I/B/E/S.

The company raised its fiscal 2010 outlook to $3.57 to
$3.75 a share from a prior view of $3.40 to $3.63 a share, but
that fell short of the consensus estimate of $3.77 a share.

REBUILDING INVENTORY

In the first quarter, the Menomonee Falls, Wisconsin-based
company’s net income rose to $199 million or 64 cents a share
from $137 million, or 45 cents a share, a year earlier.

Analysts were expecting it to earn 62 cents a share.

Net sales during the quarter, which ended May 1, rose about
11 percent to $4.04 billion, beating expectations.

Sales at stores open at least a year rose 7.4 percent and
Chief Financial Officer Wes McDonald said same-store sales
would be up between 3.5 and 5 percent for the year.

That more modest pace of growth for the rest of the year
may hurt the stock’s valuation, an analyst said.

“Given its slowdown in growth, we believe a lower multiple
than what has historically been the case is appropriate,” Credit
Suisse analyst Michael Exstein wrote in a note.

Mansell told Reuters that sales growth would have to come
from market share growth.

“Demand in the categories in which we operate is flat or
down over the last couple of years, therefore the successful
retailers are going to have to take business from others,” Mansell
said in an interview.

Leaner inventories, which reduce the need for discounting,
helped boost gross margins by 0.5 percentage point to 38.1
percent. McDonald said margins would rise by between 0.2 and
0.4 point during the second quarter.

Kohl’s is building its inventory back up with improved
consumer demand, and Mansell said that levels would be up in
the “low single digits” at the end of the current quarter.

Manning & Napier analyst Walter Stackow said that Wall Street
expectations for Kohl’s momentum through the end of the year had
grown very high.

But one concern, Stackow said, could be the uncertainty
surrounding which bank will issue Kohl’s private label credit
cards when its current arrangement ends, and the impact on
earnings of new federal credit card legislation.

The company expects to announce its new credit card
arrangement in the fall, though McDonald suggested it may be
simpler to stay with current partner JP Morgan Chase & Co
(JPM.N: ).

Kohl’s opened nine stores during the quarter and is on
track to open a total of 30 locations in 2010. Most of the
remaining store openings will occur in the fall, Mansell said.

Upscale retailer Nordstrom Inc (JWN.N: ) will report
quarterly earnings after the close of markets on Thursday, while
Penney will report earnings on Friday.

Stock Investing

(Reporting by Phil Wahba and Dhanya Skariachan; Editing by
Michele Gershberg; Derek Caney, Matthew Lewis, Phil Berlowitz)

UPDATE 4-Kohl’s outlook disappoints, shares down