March 3, 2020 / 12:35 PM / 3 months ago

UPDATE 3-Kohl's beats holiday-quarter profit estimates as Amazon partnership pays off

(Adds details from conference call, updates shares)

By Nivedita Balu

March 3 (Reuters) - Kohl’s Corp beat tempered expectations for holiday-quarter profit on Tuesday as its partnership with brought in more shoppers, and said it would exit some women’s brands to revive the struggling business.

The retailer was one of the department store chains to log lower sales for the holiday period, raising questions about the prospects of brick-and-mortar businesses in the face of fierce competition from online retailers.

To attract younger shoppers, Kohl’s expanded its partnership with Inc to accept returns of products ordered online at all of its more than 1,000 stores.

“It’s clear ... that Amazon is bringing in a newer and younger customer and bringing it into the stores,” Chief Executive Officer Michelle Gass told analysts.

The company has also tied up with fitness center operator Planet Fitness Inc to open workout centers near some of its stores.

Kohl’s shares rose as much as 4% to $40.05 on Tuesday.

Still, analysts believe the company needs to improve its merchandise in the women’s apparel category, where it lost out to newer styles from Target and other European brands during the all-important holiday season.

Gass said Kohl’s would exit eight down-trending women’s brands over the year, while introducing new brands to boost sales and hiring a new leadership team to manage the business.

For the fourth quarter, Kohl’s reported flat comparable sales, citing slowness in the women’s apparel category. It still managed to beat the average estimate of a 0.11% fall.

“They’re getting the traffic now ... now the hyper focus on women’s is obviously needed,” said Gabriella Santaniello, founder of retail consulting firm A Line Partners.

“The problem with women’s (category) is that... if the product doesn’t resonate, it takes something extraordinary to get her back.”

The company forecast 2020 earnings largely below Wall Street estimates as it offers heavy discounts to bring in shoppers.

It expects earnings between $4.20 per share and $4.60 per share for fiscal 2020. Analysts were expecting a profit $4.59 per share, according to IBES data from Refinitiv.

Net income fell 2.6% to $265 million from a year earlier.

Excluding one-time items, the company earned $1.99 per share, beating the estimate by 11 cents. Analysts lowered their estimates after Kohl’s last month said it expects full-year earnings to come in at the bottom end of an already lowered forecast. (Reporting by Nivedita Balu in Bengaluru; Editing by Saumyadeb Chakrabarty)

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