Kohl’s posts surprise profit as cost cuts pay off, shares jump

(Reuters) -Kohl’s Corp on Wednesday reported a surprise profit as the department store operator’s efforts to reduce excess inventory and slash costs under a newly appointed CEO started paying off, sending its shares up 12%.

The company also maintained it full-year targets even as it posted a bigger-than-expected drop in quarterly comparable store sales.

The department store is attempting a turnaround under Chief Executive Officer Tom Kingsbury, who took the helm in February. To drive consistent sales and earnings, Kohl’s (NYSE:) is working on reducing reliance on margin-sapping discounts to clear inventory and focusing on in-demand categories including work wear.

Kohl’s said its first-quarter gross margin grew by 67 basis points, as the company worked to manage its inventory, bringing it down by 6% during the quarter.

Earnings per share came in at 13 cents, compared with analysts’ average expectation of a loss of 42 cents, while operating expenses fell 4.2% to $1.2 billion.

However, ongoing cost-of-living pressures have dented discretionary consumer spending, which led to a 4.3% decline in Kohl’s first quarter comparable sales, compared with analysts’ average estimate of a 3.9% fall, according to Refinitiv IBES data.

It maintained its fiscal 2023 earnings per share in the range of $2.10 to $2.70, and operating margin at about 4%.