Wall Street is showing increased faith in

Kohl's

(KSS) - Get Report

ability to maintain a turnaround after the company unveiled more new product and merchandising plans at its annual shareholders' and analyst meeting Wednesday.

Kohl's is "upping the competitive ante," according to Bank of America Securities analyst Dana Cohen, who upgraded shares of the company to buy from neutral, Thursday morning and set a 12-month target price of $55. She was particularly impressed with the company's new merchandising plans.

Shares of Menomonee Falls, Wisc.-based Kohl's were lately up $1.28, or 2.8%, at $47.84. The shares are down about 12% over the last 52 weeks.

Cohen noted that most importantly, Kohl's management team recognizes that the competitive environment has changed. She said the meeting in Chicago was "the first time we have heard Kohl's management acknowledge that their competitors are executing better today than they were three years ago."

That acknowledgement will affect how Kohl's operates and is helping to drive positive moves from the company in product, marketing and in-store presentation, Cohen said.

Kohl's said it plans to offer Chaps in its men's department in 2005. The Chaps brand is licensed by

Polo Ralph Lauren

(RL) - Get Report

from manufacturer

Warnaco

(WRNC)

.

In addition, Kohl's will introduce the Royal Velvet brand in its home departments in spring 2005. And the company has made a previous announcement that it will add a new private brand, apt. 9, in misses and men's, and three exclusive brands of cosmetics developed by

Estee Lauder

(EL) - Get Report

in the fall.

Earlier this year, Kohl's launched its Daisy Fuentes brand in the misses department and Laura Ashley Lifestyles and Gloria Vanderbilt Home in the home department. Most of those previous new product announcements will hit stores in the third quarter.

For Cohen, the latest plans have helped to prove that Kohl's is no longer sitting still while competitors improve.

Sanford Bernstein analyst Emme Kozloff also came away from the meeting feeling comfortable that the company can deliver a 2004 turnaround from the company's 2003 results, which she termed "a debacle." She sees top-line recovery in the second half of 2004, going into 2005.

The company's new product announcements will add color and updated styles to its lineup, which pleased Kozloff. "Kohl's does not lead in fashion by any means but is trying to capitalize on proven styles and fabrications that are successful in the marketplace today," she wrote in a research note.

Kozloff suspects the company's new Chaps offering has the potential to eventually move into its women's business. She also said the company's new vendor portal system, which gives Kohl's vendors Internet access to sales information, will let Kohl's hold vendors more responsible for inventory and supply-chain matters. That will help strengthen Kohl's own business by reducing markdowns.

In 2003, Kohl's business was plagued by high levels of inventory, but Kozloff thinks the company should have inventory levels flat with last year by the end of this year. The company receives less inventory now at the beginning of a season.

"Not only does this better allow Kohl's to match supply and demand, reducing the level and risk of markdowns, it helps create a constant stream of newness in the stores so the customers aren't seeing the same merchandise every time they visit," said Kozloff, who has an outperform rating on the stock.

However, Cohen expects that the new product rollouts will have their share of problems, saying "this is a big ship trying to turn." But she upped her full-year 2004 EPS estimate to $2.15 from $2.08 and her full-year 2005 EPS estimate to $2.55 from $2.47.

(Bank of America does investment banking for Kohl's; Bernstein does not).