FILE PHOTO: The Kohl’s label is seen on a shopping cart in a Kohl’s department store in the Brooklyn borough of New York, U.S., January 25, 2022. REUTERS/Brendan McDermid/File Photo
The Kohl’s label is seen on a shopping basket in a Kohl’s department store in the Brooklyn borough of New York, U.S., January 25, 2022. REUTERS/Brendan McDermid

(Reuters) -Kohl's on Tuesday projected a smaller drop in sales and bigger profit for the full year ahead of the new CEO's first holiday season at the helm, triggering a 27% surge in the U.S. department-store operator's shares in premarket trading.

The second annual forecast raise this year signals early success of its turnaround under Michael Bender, who was named permanent CEO a day earlier, as the retailer adds more coupon-eligible products and invests in proprietary brands to attract value-focused shoppers.

Kohl's shares have more than doubled since Bender took on the interim CEO role in May. They also got a lift from the so-called meme stock euphoria in July.

Shares of rival Macy's were up about 5% in premarket trading.

"It's still early in the holiday season but the outlook suggests that Kohl's is somewhat optimistic. It seems like the business is stabilizing," said David Swartz, analyst with Morningstar.

Kohl's expects fiscal 2025 adjusted earnings per share to be between $1.25 and $1.45, compared with the prior range of 50 cents to 80 cents.

The company forecast annual sales to decline in the range of 3.5% to 4%, compared with a decrease of 5% to 6% previously estimated.

TARGETING LOYAL AND YOUNGER CUSTOMERS

Kohl's has been reviving categories such as fine jewelry and accessories - displaced during merchandise changes taken in the past - to boost demand from its core and loyal customer base.

The company has ramped up partnerships like Sephora - featuring trendy brands like Selena Gomez's Rare Beauty, Prada's Miu Miu, and L'Oreal's Kerastase - aimed at drawing in younger shoppers to its mid-tier department stores.

Kohl's posted a surprise adjusted profit of 10 cents per share for the third quarter ended November 1, compared to estimates of a loss of 20 cents, according to data compiled by LSEG.

Quarterly gross margin rose 51 basis points to 39.6%.

The company's year-long cost-cutting measures such as reducing inventory, closing underperforming stores and trimming corporate jobs have shielded its margins from higher investment and promotional activities.

The company's quarterly sales were $3.41 billion, topping estimates of $3.32 billion.

(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Sriraj Kalluvila)