Kohl's (NYSE:KSS) blew away Wall Street's earnings expectations in the third quarter, reported Tuesday, posting a penny per share adjusted profit compared to the $0.43 per share loss analysts forecast, but revenue plunged 14% year over year as comparable store sales tumbled more 13%, both worse than expected.

The department store chain still feels it is well positioned for the coming Christmas shopping season and says sometime in the first half of 2021 it will reinstate the dividend payment it halted earlier this year due to the pandemic.

Kohl's order pickup service sign

Image source: Kohl's.

In a better position

The results represent a sequential improvement for the retailer as the sales drop was less than the 23% recorded in the second quarter and the adjusted profits were a big jump from the per-share loss it suffered then.

Gross margins also declined 48 basis points from last year, but that's substantially better than the 569 basis point plunge they suffered in the second quarter.

Digital sales also rose 25% versus a year ago, though that was less than half the rate of increase it enjoyed in the second quarter.

Wall Street seems to have thought Kohl's performance would be substantially better as analysts had a consensus view of $3.86 billion, still down from last year but more than the $3.76 billion the retailer recorded. Similarly, they were only expecting an 11.4% drop in comps. 

CEO Michelle Gass, however, maintained Kohl's "entered the holiday season well-positioned" to meet customer demands, and the retailer noted it had sufficient financial resources with $1.9 billion in cash after fully paying off its $1 billion revolving credit facility.

Kohl's suspended its dividend of $0.55 per share in April as its yield exceeded 17%, causing many to question its sustainability.

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