Kohl's Beats Expectations, Ups Outlook (Updated)

(Analyst commentary and stock prices added.)

MENOMONEE FALLS, Wis. (TheStreet) -- Kohl's(KSS Quote) is proving not all department stores are in the ditch.

While the company's second-quarter profit fell slightly 3%, the results still managed to beat Wall Street's expectations, leading the company to raise its full-year outlook.

During the quarter, the department store earned $229 million, or 75 cents a share, a penny above analysts' expectations. That compares with a profit of $236 million, or 77 cents, last year.

Sales increased 2% to $3.81 billion from $3.73 billion, as the company realized gain across most merchandise areas and regions. Nonetheless, same-store sales still showed some signs of weakness, falling 2.3%.

"We continue to experience improvements in inventory management and increased penetration in 'Only at Kohl's' brands that have led to improved gross margins," CEO and President Kevin Mansell said in a statement.

Kohl's exclusive and private-label brands comprise 45.6% of sales and could represent up to 50% of sales going forward, Stifel Nicolaus analyst Richard Jaffe wrote in a note.

The department store raised its full-year guidance to $2.59 to $2.70 a share, up from a prior forecast of $2.19 to $2.42 a share.

But Jaffe said that this outlook is below his at Wall Street's expectations.

"Historically, management has been conservative with its initial guidance and has increased it throughout the quarter as trends remain positive," he wrote. "We believe that this could be the case for the second half, as we hope management will continue to under-promise and over-deliver."