Retail giant Kohl's (NYSE: KSS) reported second-quarter earnings this morning, saying they fell 3% due to higher expenses. Despite the drop, KSS managed to top expectations with the latest results. KSS pulled in 75 cents per share for the quarter, a penny better than what the Street expected. Quarterly sales increased 2% in the quarter, rising to $3.81 billion and beating expectations of $3.79 billion in sales, but unfortunately, same-store sales dropped 2.3%. Looking ahead, KSS forecast full-year earnings of $2.59 to $2.70 per share, up a great deal from its earlier forecast of $2.19 to $2.42 per share. Still, the upper end of the new forecast range is still eight cents shy of the Street's expectations.
What can we expect from the retailer stock today? Couple Kohl's earnings report with the earnings report from sector giant Wal-Mart Stores (NYSE: WMT) and you have the recipe for a solid day in the entire retail sector.
Technically, we could see this news help the stock put some distance between it and its 50-month moving average. This trendline had acted as resistance for the better part of the past two years, but may now switch roles and act as support. The shares may find a bit of resistance in the $53 region, which turned KSS away in late 2008, but a retreat from this resistance could be minuscule. Further support could come from KSS's 10-week moving average, which is powering its way toward the $49 level.
More importantly, we need to look to the future for retailers in general with the back-to-school shopping and the Christmas season coming our way. Watch for volatility out of the sector, with swings pivoting on the latest news. The thing is, expectations are going to be low as we head into these busiest times of the year. Expect this, a lot of advertising, a lot of sales, and a lot of lowered prices. The question ultimately is, will the American consumer be buying?
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