Two of the nation's biggest department stores didn't crush it during the third quarter but showed just enough to hint to investors that the holiday season is unlikely to be a post Election Day profit massacre.
Shares of the mid-tier department store Kohl's (KSS) surged as much as 11% in early afternoon trading on Thursday as third-quarter earnings came in at 80 cents a share, handily surpassing analysts' estimates of 70 cents. Sales fell 2.3% from the prior year to $4.3 billion, in line with Wall Street forecasts.
Kohl's quarter was certainly setup to let down investors due in large part to warmer-than-expected weather. "We believe warm weather in September and October dampened demand for fall seasonal items at Kohl's. The company is the most weather sensitive name we cover, since it is a key item business and customers tend to buy closer to need on average," wrote Jefferies analyst Dan Binder ahead of the results.
But Kohl's sales didn't completely miss the mark, with same-store sales falling 1.7% compared to estimates for a 1.4% drop. The result likely spurred hope the Kohl's shopper is in a good mindset -- at least prior to Election Day -- ahead of the holiday shopping season. Meanwhile, Kohl's inventory fell 10.1% from the prior year to $4.7 billion, leaving it in good shape to show consumers its new full-price products during the holiday season.
The company reiterated its full-year earnings outlook of $3.80 to $4 a share.
Meanwhile, Macy's (M) sales also looked to be moving in the right direction compared to earlier in the year. Coupled with some new deals to sell off prized real estate, Macy's stock tacked on about 6% by afternoon trading.
Net sales tallied $5.63 billion, down 4.2% from the prior year, and relatively in line with forecasts. Same-store sales fell 2.7%, but were narrower than estimates that called for a 3.4% drop. Macy's said it resumed its stock buyback plan during the third quarter, repurchasing 3 million shares for about $108 million.
The company reiterated its full-year earnings outlook of $3.15 a share to $3.40 a share. It now sees same-store sales for the full year falling as much as 3%. Previously, sales were seen declining up to 4%.
"Our expectation is that business returns to normal now that we are passed the election -- it's too early to tell what the impact of the election will be, it has only been a day and a half," Macy's CEO-Elect Jeff Gennette told TheStreet in an interview when asked about the confidence in still reaching its full-year profit outlook following the end to contentious race for the White House. Gennette added, "We feel very good about pieces of our business that are starting to pick up strength, really led by the apparel zones in men's, women's and kids."