What happened

Shares of Kohl's (KSS -3.31%) 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.