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Updated from 5:05 p.m. EST



(KSS) - Get Kohl's Corporation Report

, the discount-department store hybrid that's on a growth tear, said Tuesday that fiscal third-quarter earnings rose almost 45% as it continued to expand and to boost gross margins.

Menomonee Falls, Wis.-based Kohl's said third-quarter net income rose to $76.7 million, or 23 cents a diluted share, from $53 million, or 16 cents a share, a year ago. Analysts had expected the company to earn 22 cents a share, according to

First Call/Thomson Financial

. Third-quarter earnings growth actually accelerated from the 34% seen in the first quarter and 42% in the second -- a rarity among retailers these days. Sales rose 31% to $1.44 billion.

On a conference call with analysts and investors, Kohl's President Kevin Mansell said there was "very strong momentum across the store" heading into the crucial holiday sales season and that the company's inventories were in good shape to meet demand for key items.

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Kohl's (top) outperforming retail index

Kohl's has been a retail star over the last year, continuing to post strong same-store sales and earnings growth even as its contemporaries have faltered. Retailers have been hard hit this year by slower consumer spending, tough comparisons with 1999, price competition and higher fuel and labor costs. But while Kohl's shares have recently slipped, it still trades at more than 57 times trailing 12-month earnings, a pretty astonishing valuation considering the current environment. By contrast, retail bellwether


(WMT) - Get Walmart Inc. Report

trades at about 33 times earnings.

There are few money managers willing to bet against Kohl's, despite its high valuation. As

wrote back in March, the company is expanding in the Northeast, and analysts say consumers are embracing the Kohl's format of easy-to-navigate stores featuring name brands at low prices. In fiscal 2001, which begins in February, Kohl's will open between 55 and 60 new stores, including 15 in the Atlanta area. With its current momentum, Kohl's is likely to continue to command a premium.

Kohl's shares rose $2.94, or 6%, to close at $51.69 ahead of third-quarter earnings.