Off-mall department store retailer Kohl's (NYSE:KSS) has been firing on all cylinders lately, becoming one of the fastest-growing retail chains out there. Tomorrow, investors will have an opportunity to see how 2007 is turning out; the company plans to release first-quarter results after the market closes.

What analysts say:

  • Buy, sell, or waffle? Twenty-five analysts currently follow Kohl's. Eleven are bullish, and 14 are on the fence with hold ratings.
  • Revenue. On average, they expect to see $3.6 billion in sales, or 11.7% growth.
  • Earnings. Analysts project earnings of $0.62 per share, or 29.2% growth from last year's $0.48 per share.

What management says:
On May 10, Kohl's announced it was "comfortable with the current First Call consensus of $0.62 per diluted share for the first quarter." The company ended last year with 732 stores in 41 states, and it plans to keep aggressively rolling out new stores. During the fourth-quarter earnings release, management announced that "in 2007, we will continue our focus on merchandise content, marketing, inventory management and the in-store shopping experience to drive in new customers and continue to take market share."

This translates into guidance of 9%-11% total sales growth for this year and same-store sales improvements of 2%-4%. Management currently expects full-year earnings of $3.68-$3.84, for a forward P/E of about 19.

What management does:
Annual margin trends have been more consistent than trends over the past six periods, which tend to fluctuate, since retailing is a seasonal business. Gross margin tends to hover around 36%, operating margin usually comes in close to 12%, and net margin has increased over the past four years, ending the last fiscal year at 7.1%.

Margin

10/05

1/06

4/06

7/06

10/06

2/07

Gross

35.5%

35.5%

35.6%

35.8%

36.0%

36.4%

Operating

10.3%

10.9%

10.7%

10.9%

11.2%

11.9%

Net

6.1%

6.3%

6.4%

6.5%

6.8%

7.1%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Over the past 12 months, net margins at Kohl's have exceeded those of larger rivals Wal-Mart (NYSE:WMT) and Target (NYSE:TGT), as well as Dillard's (NYSE:DDS), Bon-Ton Stores (NASDAQ:BONT), and Sears Holdings (NASDAQ:SHLD). Only Nordstrom (NYSE:JWN) managed to best Kohl's on the margin front, thanks to its higher-end fashion focus, but Kohl's also has highfalutin ambitions, signing deals with designers such as wedding-savvy Vera Wang. Kohl's growth also ranks among the fastest in the industry, with sales and earnings advancing close to 17% annually over the past five years.

Such performance is enviable, and the stock has been on a tear since early 2004, rising more than 60%. It's moved down from recent highs, but at current levels, the shares are likely already discounting continued strong top- and bottom-line trends. The valuation isn't overly lofty, but the best time to buy high-flying retailers can be when comps come in weak, which is all but inevitable in the fickle fashion apparel business.

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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.