Kohl's Profit Beats on Higher Margins

Department store operator Kohl's reported a better-than-expected quarterly profit, helped by higher margins despite a 2.8 percent drop in sales.

Kohl's shares were up 3.2 percent at $43.10 in premarket trading on Thursday.

The company, like rival Macy's, reported weak sales in November and December as it struggles to overcome stiff competition from Amazon.com Inc and weak demand for clothes and accessories.

However, Kohl's likely had to discount lesser in the fourth quarter than rivals as it entered the holiday season with low inventories, analysts said.

"We saw improvement in merchandise margin, and our team continued to manage inventory and expenses extremely well," Kohl's Chief Executive Kevin Mansell said in a statement.

Gross margin rose to 33.4 percent from 33.1 percent in the quarter, and inventories were down 6 percent.

Sales at Kohl's stores open at least a year fell 2.2 percent, in line with the average analyst estimate from research firm Consensus Metrix.

Net income fell to $252 million, or $1.44 per share, in the quarter ended Jan. 28, from $296 million, or $1.58 per share, a year earlier.

Net sales fell to $6.21 billion from $6.39 billion a year earlier, falling for the fourth straight quarter. Analysts on average had expected earnings of $1.33 per share on revenue of $6.22 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Shounak Dasgupta and Martina D'Couto)