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Kohl’s Just Blew Past Earnings Forecasts — so Why Are Investors Ditching Its Stock?

After enjoying a solid jump in early-morning trading, shares for Kohl’s Corp. have descended into the red after the firm’s first-quarter conference call may have tempered some of the excitement surrounding its results for the period.

As of 11:10 a.m. ET, shares of the Menomonee Falls, Wis.-based department store chain were down nearly 7 percent to $61.16. (They had risen as much as 6 percent on the heels of the conference call, when only the initial earnings release was available.)

For the period ended May 5, Kohl’s posted revenues of $4.2 billion, a gain of 3.5 percent over the comparable quarter, handily topping forecasts for revenues of $3.95 billion. Same-store sales advanced 3.6 percent, while analysts predicted a gain of 2.7 percent.

During the conference call, Kohl’s CFO Bruce Besanko said the first-quarter same-store sales benefited from a calendar shift due in part to the timing of the friends and family event leading into Mother’s Day.

“We estimate this impact to be approximately 320 basis points,” Besanko said. “The shift will also positively impact our second-quarter comp but will be a headwind in the third and the fourth quarters.”

It is likely the latter concern that worried investors who have been selling off the department store’s shares throughout the morning.

Kohl’s said its reported profits also climbed 14 percent year over year to $75 million, or 45 cents per diluted share. On adjusted basis, gains were significantly higher, with profits up 62 percent over the prior same period to $107 million, or 64 cents per diluted share. Analysts had expected earnings per diluted share of 50 cents.

Kohl’s CEO Michell Gass told investors that footwear has remained a top-performing category for the company, which notably launched its Under Armour partnership in 2017.

“Footwear continues to be one of our strongest-performing categories and is an excellent example of the success we’ve had implementing new product strategies,” Gass said. “We have continued to enhance our portfolio with the introduction of relevant new brands, including Matt in NYC, Clarks, Cool Bar by Ag and most recently Circus Bay Edelman and Timberland Pro.”

Looking ahead, the company also improved its forecast and now expects adjusted fiscal 2018 diluted EPS to be $5.05 to $5.50, compared with its prior guidance of $4.95 to $5.45. Including the loss on extinguishment of debt, fiscal 2018 diluted earnings per share are expected to be $4.86 to $5.31. Analysts had expected a forecast for diluted adjusted EPS of $5.29, at the much higher end of the adjusted guidance.

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