NEW YORK ? Department store operator Kohl's Corp. said Thursday its third-quarter profit rose 20 percent, helped by strong demand for exclusive brands like Jennifer Lopez and Marc Anthony.
Kohl's, based in Menomonee Falls, Wis., raised its full-year outlook, and says it's counting on continued spending during the holiday period. Its shares jumped 2 percent in trading.
Kohl's, like many department stores with moderately-priced merchandise, is facing challenges in getting its middle-income shoppers to spend. Kohl's results underscore a trend that's playing out in stores across the country in this down economy. Shoppers are focused on getting the cheapest prices on basics like tee shirts, but are willing to spend a premium to snag affordable luxuries.
Kohl's stepped up its marketing and deepened promotions on some basic items during the quarter, which drew deal-seeking shoppers. But customers were also lured into stores by the Jennifer Lopez and Marc Anthony collections, which hit stores in mid-September and feature such items as $69.99 platform shoes and $70 wool ponchos.
"It shows what we have learned over time," said Kevin Mansell, chairman, president and CEO during an interview with The Associated Press Thursday. "If we have something exciting and well-priced, people are open to spend."
He noted that Kohl's customers remain thoughtful in their purchases amid worries about the job market and higher basic household costs.
"We all see the same numbers on consumer confidence, which is not moving in the right direction," Mansell continued. "Nothing has appreciably changed" in the economy.
Store-label products like the new collections by Jennifer Lopez and Marc Anthony can differentiate a department-store chain from competitors. They also translate into fatter profit margins. By sourcing and designing their own products, merchants can eliminate the extra costs associated with buying from branded suppliers. Other exclusive lines at Kohl's that fared well included Simply Vera by Vera Wang, Apt. 9 and Food Network-branded kitchen products and other home accessories.
During the three-month period which ended Oct. 29, store label and exclusive brands accounted for 51 percent of total sales, up from 25 percent in 2004, according to Mansell in a conference call with analysts Thursday.
That helped prop up profits in the third quarter. Kohl's said net income rose to $211 million, or 80 cents per share, matching the expectations of analyst polled by FactSet. That's up from $176 million or 57 cents per share, a year ago.
Revenue rose 4 percent to $4.38 billion from $4.22 billion last year, also roughly matching analysts' expectations.
Revenue in stores open at least one year ? a gauge of a retailer's health ? rose 2.1 percent. That's an improvement from the 1.6 percent increase the retailer had in the second quarter.
In the fourth quarter, Kohl's expects net income of $1.93 to $2.04 per share. The company expects revenue to rise 4 percent to 6 percent to $6.28 billion to $6.4 billion. The company also projected that revenue at stores opened at least a year will rise between 2 percent to 4 percent for the fourth quarter. Analysts expect earnings of $1.96 per share on revenue of $6.3 billion.
For the full year, Kohl's now expects net income of $4.34 to $4.49 per share. Analysts expect $4.46 per share.
Shares rose $1.07 to close at $55.36.
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