A disappointing sales report and an earnings warning from Kohl's ( KSS) on Thursday has left investors pondering about the future direction of the company's stock.

For most retailers, a report like the one Kohl's issued Thursday would likely lead to plunging share prices. But Kohl's shares fell only slightly after its report.

For the time being, investors seem to have decided that Kohl's, one of the pricier names in retail, is not like most retailers. The question is whether that assessment will change.

"There are two ways to look at Kohl's," said Gary Farber, a partner with the hedge fund Nightingale & Farber. "It's still the fastest-growing name in retailing and people will say it's worth the multiple."

But if people focus on the slowing same-store sales, "this will become a controversial name," he said. For now, Nightingale & Farber is staying on the sidelines.

On Thursday Kohl's reported that its same-store sales, which compare results at outlets open more than one year, fell 4.1% in April. The company added that its first-quarter earnings would come in at about 32 cents a share, some 4 cents to 8 cents below its previously guided range.

Given that the company trades at a fairly high multiple for a retailer -- about 24 times projected current-year earnings -- its stock might have been expected to take a tumble. But despite the disappointing report, Kohl's stock fell just $1.74, or 3.1%, to $54.76 in recent trading.

The company's report was dismal, analysts seemed to agree. But for now most investors seem to have residual faith in Kohl's, they said.

"It's a premium-priced stock. Nobody likes to see it when a growth company puts up numbers like this," said Emme Kozloff, who covers Kohl's for independent research company Sanford Bernstein. But she added, "There are very few stories like Kohl's in retail. That's why people are hard-pressed to write it off and overreact."

Kozloff has a market perform rating on Kohl's shares. "It will be interesting to see where the shares go from here," she said.

Kohl's has been one of the darlings of the retail world over the last few years. The company has found a niche as a discount department store chain offering name-brand products at low prices. Unlike department stores, the company has posted solid square footage and revenue growth. Meanwhile, it's largely been able to avoid direct competition with discount giants Target ( TGT)and Wal-Mart ( WMT).

The company has offered a rare story for investors: a fast-growing department store chain. In its just-completed fiscal year, for instance, the company increased its earnings per share by 29% to $1.87, while growing its revenue 22%.

In fiscal 2002, which ended in February, the company expanded its store base 20% to 457 stores. Kohl's plans to add another 80 stores in its current fiscal year.

That growth rate has given the company some leeway, analysts say. Its competitors, which include department store chains like Federated ( FD) and Nordstrom ( JWN), have been struggling, generally losing market share while posting poor comparable store sales figures.

"As long as you've got square-footage growth and market share gains, you will always get the benefit of the doubt," Kozloff said.

Part of investors' faith in the company has to do with history, said Fran Radano, a research analyst for Gartmore Global Investments. Kohl's always seems to bounce back from poor same-store sales results to post positive numbers, he says.

Last September, for instance, Kohl's reported that its comparable-store sales fell 3.2%. The next month, the company reported a same-store sales gain of 18.3%.

Likewise, the company's stock has always seemed to bounce back from selloffs, Radano said.

"The stock's been unbelievably resilient," Radano said.

Part of that is the company's expanding store base, notes one fund manager, who asked not to be named. The company recently opened stores in the New York and Boston areas that performed well. Earlier this year, the company stared opening stores in the Los Angeles area, its first foray in California. Those, too, are expected to do well.

"Most people think those openings will make a great difference for them," the fund manager said. The poor sales in April are "just a bump in the road," the fund manager added.

But the company could face other bumps going forward, some analysts say.

The company's comparable-store sales have been erratic and it's hard to predict what they will be going forward, Radano said. Although Gartmore has a slight overweight position on the company as a whole, the stock is somewhat pricey and "you certainly don't want to add (to your position) here," he said.

With the poor sales, Kohl's will likely have to cut prices to clear spring inventory, thus narrowing margins, the fund manager said. That likely led to the earnings shortfall in the first quarter and potentially could affect the second quarter as well.

"They're going have clear out inventory. They're going too have to be very aggressive," the fund manager said. "Hopefully that will hit this quarter. They didn't mention anything about next quarter. We shall see."

If you liked this article you might like

Short-Circuited

Short-Circuited

SEC Launches Inquiry of Electronic Arts Options

SEC Launches Inquiry of Electronic Arts Options

Apple's iTV Intriguing but Not a Core Business

Apple's iTV Intriguing but Not a Core Business

Street Applauds Adobe Systems

Street Applauds Adobe Systems

Adobe Reaffirms Guidance

Adobe Reaffirms Guidance