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

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 ofthe pricier names in retail, is not like most retailers. The question iswhether that assessment will change.

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

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

On Thursday Kohl's reported that its same-store sales, which compareresults at outlets open more than one year, fell 4.1% in April. The companyadded that its first-quarter earnings would come in at about 32 cents ashare, 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 nowmost investors seem to have residual faith in Kohl's, they said.

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

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

Kohl's has been one of the darlings of the retail world over the lastfew years. The company has found a niche as a discount department storechain 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-growingdepartment store chain. In its just-completed fiscal year, for instance, thecompany increased its earnings per share by 29% to $1.87, while growing itsrevenue 22%.

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

That growth rate has given the company some leeway, analysts say. Itscompetitors, 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, youwill always get the benefit of the doubt," Kozloff said.

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

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

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

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

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

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

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

The company's comparable-store sales have been erratic and it's hard topredict what they will be going forward, Radano said. Although Gartmore hasa slight overweight position on the company as a whole, the stock issomewhat 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 clearspring inventory, thus narrowing margins, the fund manager said. That likelyled to the earnings shortfall in the first quarter and potentially couldaffect the second quarter as well.

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

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