If you bought some stock in the nation's department stores ahead of their third-quarter results, then you probably got an early holiday present.
Shares of the mid-tier department store Kohl's (KSS) surged about 20% this week 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 set up 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.
"No doubt apparel retail has had its challenges of late, however we are encouraged by Kohl's focus on what they can control such as leaner inventories, tighter expenses and getting product to market quicker, while also launching new
relevant brands like Under Armour (UA) ," Piper Jaffray analyst Neely Tamminga told clients in a note after the results.