NEW YORK -- Kohl's Corp. reported that profit rose 17 percent in the second quarter despite the uncertain economy, in large part due to the success of its store-label brands such as Vera Vera Wang and Food Network. The company also raised its guidance for the full year.
The department store chain, based in Menomonee Falls, Wis., said its net income rose to $303 million, or $1.09 per share, in the three months ended July 30. That compares with $260 million, or 84 cents per share, in the year-ago period. Analysts had been expecting earnings of $1.05 a share.
Revenue was up almost 4 percent to $4.25 billion, but was below the $4.32 billion analysts were expecting. Revenue at stores opened at least a year, a key measure of a retailer's health, rose 1.6 percent.
Like many department stores, Kohl's has benefited from its strategy of beefing up its assortment of store-label products to differentiate itself from the competition. That translates into fatter profit margins because merchants can save money by sourcing and designing their own products and therefore eliminate the extra costs associated with buying from branded suppliers.
During the second quarter, Kohl's gross margin rate rose to 40.7 percent from 40.3 percent in the year-ago period. Kevin Mansell, Kohl's CEO, said the rate rose because of "our increased penetration of private and exclusive brands and disciplined inventory management."
Next month, Kohl's plans to add to its exclusive brands from entertainers Jennifer Lopez and Marc Anthony to draw customers. Mansell said both brands "will resonate strongly with our existing customers and drive new customers into our stores."
For the third quarter, Kohl's said it expects total sales to increase between 4 percent to 6 percent. It projects that revenue at stores opened at least a year will rise 2 percent to 4 percent.
Assuming share repurchases of about $500 million during the quarter, Kohl's is estimating earnings per share of 76 cents to 82 cents for the third quarter.
Kohl's increased its full-year guidance to $4.45 to $4.60 per share from an earlier range of $4.25 to $4.40 per share. Analysts are expecting profit of $4.39 per share for the year.