By and  on May 18, 2007

NEW YORK — Innovation clearly pays off in retailing these days.

Three of the most aggressive department store retailers in terms of new ideas — J.C. Penney Co. Inc., Nordstrom Inc. and Kohl's Corp. — all reported double-digit gains in first-quarter profits on Thursday and raised their guidance for the full year.

Penney's has been aggressive in developing exclusive fashion merchandise, including a new lingerie line, its beauty format with Sephora and apparel from Liz Claiborne Inc. It also is aggressively expanding, with plans to break into Manhattan in 2009. Nordstrom also is eager to enter the New York market while at the same time boosting its designer quotient. Kohl's, meanwhile, is pushing exclusive merchandise through deals with the Estée Lauder Cos. Inc. and, most recently, Vera Wang.

Their optimism for the remainder of the year comes despite weaker-than-expected comp-store sales last month and growing concerns that rising gas prices, the weak home market and a slowing economy will kill the American consumers' appetite for shopping. Consumer spending has been the engine of the U.S. economy for more than a decade.

J.C. Penney Co. Inc.

Penney's first-quarter profits jumped 13.3 percent as department store sales gained 4.4 percent. The company said gains were fueled by its exclusive fashion merchandise, which includes a new lingerie line and apparel from Liz Claiborne. The results beat analysts' expectations by 1 cent. In addition, the retailer increased earnings guidance for the year, raising estimates to $5.49 a share from $5.44.

"Thanks to the progress we're making on many fronts, we were able to deliver strong and, in fact, higher-than-expected first-quarter results and move up our [earnings per share] expectation for the year….At the same time, we're continuing to make strides in expanding our gross margins to reach our goal of being the growth leader in our industry," said Myron E. "Mike" Ullman 3rd, chairman and chief executive officer, during a conference call to Wall Street analysts.

For the three months ended May 5, the Plano, Tex.-based retailer said income rose to $238 million, or $1.04 a diluted share, from $210 million, or 89 cents, in the same year-ago quarter. Wall Street was expecting $1.03 a share. Total sales rose 3.1 percent to $4.4 billion from $4.2 billion. Total department stores gained 4.4 percent, while same-store sales rose 2.2 percent.Ken Hicks, president and chief merchandising officer, said during the call that sales gains were in both fashion and basic merchandise. "Private label brands continued to outperform the store average," Hicks said. The company has benefited from the success of a.n.a., one of its newer launches, and in particular the launches this year of lingerie brand Ambrielle and the exclusive Liz & Co. and Concepts by Claiborne line.

"Turning to [our] Direct [division], continues to be our fastest-growing channel and we intend to maintain our leadership position in general merchandised Internet sites. Internet sales increased 18 percent in the first quarter with good results in apparel categories," Hicks said.

He added that Direct sales fell 3.6 percent in the quarter due to challenges in the catalogue business. "While we are seeing some positive trends in apparel areas with growth in both lingerie and women's apparel, in total, catalogue has been impacted by soft sales in our big books and continued weakness in the home catalogue. We continue to manage the profitable transition of direct-to-an-Internet channel supported by specialty catalogues," Hicks explained.

Ullman concluded the call by pointing out: "We're off to a good start in implementing our updated objectives and are well positioned to deliver the financial results we anticipate for the balance of 2007, as well as our new long-range [plans] we laid out during the last month."

The chairman added that the company remains "mindful of the additional pressures that consumers are facing in the current economic climate." He disclosed that the retailer doesn't believe there's been a material change in its shoppers' behavior.

"In fact, we believe that J.C. Penney's value proposition, which combines style and quality at smart prices, becomes even more relevant [as it presents] an additional opportunity to introduce J.C. Penney to new customers by reinforcing our brand through our existing customer base," Ullman said.

Shares of J.C. Penney shot up 5.31 percent in trading Thursday to close at $79.74 on the New York Stock Exchange. More than 8.4 million shares traded, compared with a three-month average volume of 2.6 million.

Nordstrom Inc.

Nordstrom Inc. said it had a 20.2 percent climb in first-quarter earnings, and raised full-year guidance, as well.For the three months ended May 5, earnings rose to $156.8 million, or 60 cents a diluted share, from $131.2 million, or 48 cents, in the year-ago period. Sales jumped 9.3 percent to $1.95 billion from $1.79 billion, while comps gained 9.5 percent.

The company upped full-year earnings, which now are expected to be in the range of $2.81 to $2.90 a diluted share from previous guidance of $2.78 to $2.84 a share.

Full-price spring merchandise was well received, with designer apparel, accessories and women's apparel the strongest-performing categories during the quarter.

Nordstrom completed an $850 million securitization backed by the company's co-branded Visa and private labels. As part of the transaction, $350 million in off-balance sheet debt was retired and the company repaid $200 million in off-balance sheet notes that matured during the quarter.

"Over the next 10 to 24 months, we are devoting more financial and manager resources to our multichannel platform….One example of us building upon our core business is by connecting and rewarding our loyal customers through the recent launch of our enhanced fashion rewards program. Though it is still very early, we are receiving favorable responses from our customers," said Blake Nordstrom, president, in a conference call to Wall Street analysts.

Shares of Nordstrom closed at $53.17, up 1.3 percent, in trading on the Big Board. The company posted results after the markets closed.

Kohl's Corp.

Kohl's Corp. said its first-quarter earnings for the quarter ended May 5 surged 25 percent to $209 million, or 64 cents a diluted share, up from $167.2 million, or 48 cents, in the year-ago period. Sales jumped 11.8 percent to $3.57 billion from $3.2 billion, while same-store sales increased 3.9 percent.

The Menomonee Falls, Wisc.-based company raised its full-year guidance to $3.75 to $3.87 a diluted share from $3.68 to $3.84 a share.

"We are pleased with our performance for the first quarter. All lines of business posted positive comparable-sales increases, as did all regions of the country. At the same time, we saw significant improvement in our gross margin rate and continued to manage our expenses with our sales growth," Larry Montgomery, chairman and ceo, said in a release.During the quarter, Kohl's opened 17 stores, including its entry into the Idaho market. The company said in a conference call that it plans to add two new intimates brands: one, a private label brand called Moments, and the other, an extension of the Daisy Fuentes apparel line.

Shares of Kohl's gained 3.1 percent to close at $74.16 in trading on the New York Stock Exchange. The company also reported earnings results after the market closed.

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