May 13, 2010, 12:46 p.m. EDT

Kohl's profit up 45%; Urban Outfitters profit jumps 72%

NEW YORK (MarketWatch) -- Mid-priced department-store operator Kohl's Corp. said Thursday that its fiscal first-quarter profit jumped a better-than-expected 45%, helped by demand for shoes and home goods. Specialty retailer Urban Outfitters Inc.'s profit jumped 72%, driven by demand at its Anthropologie chain.

Hot Stocks: Retail Stocks DropDepartment-store operator Kohl's and specialty retailer Urban Outfitters pace the retail sector's decline after their outlooks and results fall short of heightened expectations. MarketWatch's Andria Cheng reports.
Still, shares of both retailers fell after Kohl's /quotes/comstock/13*!kss/quotes/nls/kss (KSS 57.15, +3.34, +6.21%) second-quarter forecast and full-year outlook fell short of Wall Street expectations as Kohl's plans to increase spending. It's installing test electronic signs in stores, accelerating the pace of remodeling and adding back-end support for its growing online sales. Urban Outfitters' /quotes/comstock/15*!urbn/quotes/nls/urbn (URBN 39.41, +2.63, +7.15%) shares dropped after its expenses rose more than some analysts estimated because of increased incentive compensation.

Both companies also cited continued uncertainty in the economy.

"I don't believe we are out of the woods," Urban Outfitters Chief Executive Glen Senk said on a conference call. "I'm not optimistic about the nature of the economy. It's going to be a slow and lengthy recovery."

Despite investors' increased heightened expectations, both retailers have outperformed in their respective segments, analysts said. Kohl's off-mall locations have allowed it to outperform rivals such as J.C. Penney Co. /quotes/comstock/13*!jcp/quotes/nls/jcp (JCP 28.48, +0.31, +1.10%) while Urban Outfitters, known for giving its each individual store a different flair instead of cookie-cutter designs, has attracted shoppers seeking differentiated merchandise and experience, analysts said.

"Urban Outfitters has "unique concepts and does tremendous job on merchandising," Thomas Weisel Partners analyst Liz Dunn, who has an overweight rating on both stocks, told MarketWatch. "The uniqueness of the concept is really what makes them outperform. Kohl's is taking share from a consumer shift to off-mall locations. Their stores are clean and easy to shop."

Both retailers have also controlled inventory to reduce discounts and widen profit margins. Kohl's also has stocked merchandise only available at its stores -- from Simply Vera by Vera Wang exclusive to Apt. 9 private brand -- to help bolster demand. That merchandise has increased to about 47% of Kohl's sales.

Urban Outfitters shares fell 3.8%. Kohl's was down 3%. Penney, which reports Friday, fell 2.6%. Macy's shares fell 2.6% after it also didn't raise its previously already raised outlook, citing economic uncertainty.

"Expectations are high for the industry in general," Dunn said in the interview. "People are looking for cracks in the story."

Upscale retailer Nordstrom Inc. /quotes/comstock/13*!jwn/quotes/nls/jwn (JWN 40.20, -1.09, -2.64%) reports after the close of the market. Analysts expect the retailer to benefit from a pick-up in demand by high-end shoppers. See story on Nordstrom entering New York market.

See full story on Jones Apparel looking at luxury.

Net income in the latest quarter rose to $199 million, or 64 cents a share, from $137 million, or 45 cents, a year earlier.


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Comparable sales climbed 7.4%, the Menomonee Falls, Wis.-based company said.

Kohl's forecast profit of 70 cents to 75 cents a share in the second quarter and raised its full-year outlook to $3.57 to $3.75 a share from a previous projection of as much as $3.63 a share to reflect to first-quarter results. ... 2010-05-13