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Kohl’s Profits Are Better Than Expected, But Shoppers Continue to Ditch Stores

Despite stiff online competition and waning consumer interest in department store wares, Kohl’s Corp. today posted better-than-expected fourth-quarter profits, which were boosted by higher margins.

Still, the impact of a sluggish holiday season and ongoing consumer shifts showed up in the company’s Q4 sales results.

Kohl’s said its sales slipped 3 percent — for the fourth consecutive quarter— to $6.2 billion, but were roughly in line with Wall Street’s bets. Comps also declined 2.2 percent in the quarter, slightly worse than expectations for a comp deceleration of 2.1 percent.

Profit in the fourth quarter slid 15 percent, to $252 million, or $1.44 per diluted share, but topped forecasts for diluted earnings per share of $1.33.

Kohl’s chairman, president and CEO Kevin Mansell said the department store’s “weak” Q4 sales results were driven by declines in brick-and-mortar traffic, but were slightly offset by strength in online demand.

“We saw improvement in merchandise margin, and our team continued to manage inventory and expenses extremely well,” Mansell said in a release. “In 2017, we will accelerate our focus on becoming the destination for active and wellness with the launch of Under Armour in early March. We will also extend our efforts on improving our speed to market across all of our proprietary brands into all apparel areas and home.”

When Kohl’s announced its Under Armour deal last July, the news boosted analyst and investment sentiment as experts viewed the current strength in athletic as a potential boon to Kohl’s business.

Looking ahead, the company expects earnings per diluted share of $3.50 to $3.80 for fiscal 2017. Sales are expected in the range of down 1.3 percent to up 0.7 percent. Comps are predicted to be flat to down 2 percent.

As of 10:20 a.m. ET, Kohl’s shares were up 1.3 percent, to $42.31.

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