Kohl's shares rally as another forecast raise signals turnaround taking hold

By Anuja Bharat Mistry

Nov 25 (Reuters) - Kohl's KSS.N on Tuesday projected a smaller drop in sales and bigger profit for the full year ahead of the new CEO's first holiday season at the helm, sending the U.S. department-store operator's shares surging as much as 36%.

The second annual forecast raise this year also signaled early success of a turnaround under Michael Bender, who was named permanent CEO a day earlier, as the retailer adds more coupon-eligible products and invests in proprietary brands to attract value-focused shoppers.

"As our customers continue to be more choiceful and remain under pressure, we have the opportunity to meet their needs and offer more value with elevating our proprietary brands," said Bender during a post-earnings call.

Kohl's shares have more than doubled since Bender took on the interim CEO role in May. They also got a lift from the so-called meme stock euphoria in July.

"It's still early in the holiday season but the outlook suggests that Kohl's is somewhat optimistic. It seems like the business is stabilizing," said David Swartz, analyst with Morningstar.

Mounting economic pressures have led to multiple forecasts predicting a subdued holiday shopping season this year.

Kohl's expects fiscal 2025 adjusted earnings per share to be between $1.25 and $1.45, versus its prior range of 50 cents to 80 cents.

The company forecast annual sales to decline in the range of 3.5% to 4%, compared with a decrease of 5% to 6% previously estimated.

Shares of rival Macy's M.N, set to report results on December 3, were up about 7%.

TARGETING LOYAL AND YOUNGER CUSTOMERS

Kohl's is reviving categories like fine jewelry and accessories to win back loyal shoppers, while expanding its Sephora partnership with trendy brands such as Rare Beauty, Miu Miu and Kerastase to attract younger customers.

The company posted a surprise adjusted profit of 10 cents per share for the third quarter, versus estimates of a loss of 20 cents, according to data compiled by LSEG.

Quarterly gross margin rose 51 basis points to 39.6%.

The company's year-long cost cuts, including reducing inventory, closing underperforming stores and trimming corporate jobs, have shielded its margins from higher investments and promotions.

Its quarterly sales were $3.41 billion, topping estimates of $3.32 billion.