Kohl's (KSS) rallies 12% after posting a surprise Q1 beat

Kohl's (NYSE: KSS) shares surged as much as 12% in pre-open Wednesday after the company reported better-than-feared Q1 results.

Kohl’s posted a profit per share of $0.13 in Q1, a significant upside relative to analyst expectations for a loss of $0.42 per share. Revenue fell 3.3% year-over-year to $3.36 billion, but still ahead of the $3.34B consensus.

“Our first quarter results were in line with our expectations and represented a first step as we work to drive sales and earnings performance over the long-term. We delivered margin expansion, as well as a 6% reduction in inventory. In addition, our stores business achieved productivity gains and Sephora at Kohl’s continued its sales momentum,” Tom Kingsbury, Kohl’s chief executive officer, said.

Comparable sales fell 4.3% YoY, worse than the expected 3.9% decline. On a more positive note, the company reported its gross margin expanded by 70 basis points YoY to 39%, crushing the expected 36.9%.

Similarly, merchandise inventory fell 5.6% YoY to $3.53B, again better than analysts' expectations that looked for $3.71B.

The company reaffirmed its full-year outlook for EPS of $2.40 on sales falling 3% YoY.

By Senad Karaahmetovic

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