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Kohl’s Eases Concerns About U.S. Retail Slowdown

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A Kohl's storefront in California.Photograph by Diana Haronis — Moment Editorial/Getty Images

Department store operator Kohl’s (KSS) reported better-than-expected quarterly net sales and profit, helped by strong back-to-school sales, sending its shares up nearly 6% Thursday afternoon.

Kohl’s same-store sales rose 1% in the third quarter, in line with the average estimate of analysts polled by research firm Consensus Metrix.

A surprise drop in comparable sales in the quarter at rival Macy’s had set alarm bells ringing in the department store industry on Wednesday, hitting shares of Kohl’s, Nordstrom (JWN), and J.C. Penney (JCP).

U.S. back-to-school sales rose 4.7% in August from a year earlier, according to research firm ShopperTrak. Back-to-school season is the second-biggest U.S. shopping period after the holiday season.

However, Kohl’s said sales in September were weak.

Analysts have warned that the warmest August-October quarter in 25 years hurt sales of winter apparel and footwear at department store operators. Kohl’s is known to be more weather-sensitive than rivals, and tends to have lower sales when the weather goes against expectations.

Macy’s also cited warm weather, along with tepid consumer demand and a strong dollar that discouraged tourists from spending, for its lower-than-expected sales and profit in the third quarter.

November is also shaping up to be warmer than average and could force department stores to discount more to get rid of fall season inventory to stock holiday season merchandise in time for the crucial shopping season, analysts said.

Kohl’s net income fell 15.5 percent to $120 million, or 63 cents per share, in the quarter ended Oct. 31.

Excluding items, the company earned 75 cents per share.

Net sales rose 1.2 percent to $4.43 billion.

Analysts on average had expected earnings of 69 cents per share on revenue of $4.40 billion, according to Thomson Reuters I/B/E/S.