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Why Kohl's Stock Jumped Today

By Joe Tenebruso – Nov 18, 2021 at 7:55PM

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People are spending more on clothes and beauty products as life begins to normalize.

What happened

Shares of Kohl's (KSS 2.02%) climbed 10.6% on Thursday after the retailer delivered surprisingly strong third-quarter results. 

So what

Kohl's revenue surged 15.6% year over year to $4.6 billion, fueled by a 14.7% rise in comparable sales. People returned to Kohl's stores to buy clothes for work and play, as more companies restarted in-office operations and kids resumed after-school sports.

"Our strategic efforts to transform Kohl's into the leading destination for the active and casual lifestyle continue to build momentum," CEO Michelle Gass said in a press release. "We delivered another quarter of record earnings with both sales and margins exceeding expectations."

A cashier is handing shopping bags to a customer.

Image source: Getty Images.

Kohl's was able to overcome inventory shortages and other supply-chain challenges, and still post an impressive sales performance. The department-store chain struck deals with new brands to bolster its merchandise lineup. A partnership with leading beauty-products provider Sephora led to the debut of a new in-store concept at 200 Kohl's locations. Gass said these "Sephora at Kohl's" stores are "off to a great start."

Better still, Kohl's profitability improved, with its gross margin rising more than 4 percentage points to 39.9%. This margin expansion, combined with its sales growth, helped Kohl's post record third-quarter earnings per share of $1.65, compared to only $0.01 in the prior-year period.

Now what 

These strong results prompted Kohl's to boost its full-year revenue and profit guidance. Management now expects net sales to increase by roughly 25% in 2021, compared to a prior estimate for growth in the "low-twenties percentage range." The company also raised its adjusted earnings-per-share target to between $7.10 and $7.30, up from $5.80 to $6.10.

"All of the pieces of our strategy are coming together, and we remain incredibly confident in the future of our business," Gass said.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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