What happened

Shares of Kohl's (KSS -0.47%) were taking a dive after the department-store chain reported first-quarter earnings last night. While the results topped analyst estimates, high expectations were already priced into the stock after it had doubled over the last six months coming into the report.

As of 12:21 p.m. EDT, the stock was down 9.9%.

Two women walking down steps holding shopping bags.

Image source: Getty Images.

So what

Kohl's revenue came in at $3.89 billion, up 60% from the lockdown-era quarter a year ago, but down 5% from 2019 levels. The result still easily beat estimates at $3.48 billion.

Gross margin in the period was 39%, up from 36.8% in Q1 2019, and selling, general, and administrative expenses were down by nearly 10% from 2019, helping the company gain leverage.

On the bottom line, it reported adjusted earnings per share of $1.05, which compared to adjusted EPS of $0.61 in Q1 2019, and smashed estimates at just $0.04. Stimulus checks likely helped fuel some of the strong performance.

CEO Michelle Gass said: "We are very pleased with our strong start to 2021 with both sales and earnings materially exceeding expectations. Along with a favorable consumer spending backdrop, we continue to see our key strategic initiatives gain traction and resonate with customers."

Now what

Kohl's also raised its guidance for the full year, calling for net sales growth in the mid-to-high teens compared to earlier expectations of mid-teens growth, and it sees adjusted earnings per share of $3.80 to $4.20, up from a previous range of $2.45 to $2.95.

Given the strong bottom-line results and the increase in guidance, the sell-off is surprising. However, even with today's decline, the retail stock is trading above where it started before the pandemic, indicating that the recovery has already been priced in, even though 2021 sales and adjusted EPS results are still expected to be below 2019 levels.