DOW JONES NEWSWIRES 
 

Kohl's Corp.'s (KSS) fiscal second-quarter earnings fell 3% on weaker sales, though the department-store chain was able to boost margins.

The retailer also raised its profit target for the year to $2.59 to $2.70 from May's boosted view of $2.19 to $2.42. But it projected earnings for the current quarter below analysts' expectations.

Kohl's expects fiscal third-quarter earnings of 40 cents to 44 cents on flat sales, plus or minus 1%, and same-store sales down 3% to 5%. Analysts polled by Thomson Reuters were looking for earnings of 47 cents and total sales up 1% to $3.85 billion.

Retailers have continued to struggle amid a downturn in consumer spending. Though some signs of improvement have surfaced in recent months, they may have more to do with cost-cutting and inventory-reductions than with shoppers spending more money. Consumers have been buying mostly basic items, although Kohl's said last week it saw strong same-store sales growth in the accessories, home and footwear categories.

President and Chief Executive Kevin Mansell said in May the difficult economy was helping the company gain market share from competitors, but warned the effects of the recession could still be felt. He reiterated Thursday that results indicated market-share gains and said the company continues to improve inventory management and margins.

For the period ended Aug. 1, Kohl's posted income of $229 million, or 75 cents a share, down from $236 million, or 77 cents, a year earlier. Kohl's said net sales increased 2.2% to $3.81 billion as same-store sales fell 2.3%.

Gross margin rose to 40% from 39.6%.

Kohl's has grown in recent years in part by offering exclusive lines from designers, such as Vera Wang, as well as low-cost products. It also acquired some of the now-defunct Mervyn's stores after Mervyn's went into bankruptcy last summer. As of Aug. 1 Kohl's operated 1,022 stores in 49 states, up 6.8% from a year earlier. The company plans to open another 37 stores later this year.

Kohl's shares were off 1.7% in premarket trading to $51.35.

-By Kerry Grace Benn and Kevin Kingsbury, Dow Jones Newswires; 212-416-2353; kerry.benn@dowjones.com