DOW JONES NEWSWIRES 
 

Kohl's Corp.'s (KSS) fiscal first-quarter earnings fell a less-than-expected 10% as higher costs hurt the bottom line, but revenue and margins improved.

The retail chain also raised its fiscal-year earnings target to $2.19 to $2.42 a share compared with its downbeat February projection of $2 to $2.30.

Shares rose 2.5% premarket to $43. The stock has rallied by nearly 75% since hitting a 10-year low in November.

Retailers have struggled as consumers have curbed spending. While some small signs of improvement surfaced in recent months, they may have more to do with cost-cutting and inventory-reduction efforts than with shoppers reopening their wallets. Consumers have been buying mostly basic items and Kohl's reflects that trend, reporting last week that children's clothes were a top segment.

For the quarter ended May 2, the company reported a profit of $137 million, or 45 cents a share, down from $153 million, or 49 cents a share, a year earlier. The company last week raised its forecast to 43 cents to 44 cents.

Gross margin rose to 37.6% from 36.8%. President and Chief Executive Kevin Mansell said merchandise margins improved through strong inventory management and Kohl's focus on exclusive brands.

Kohl's last week reported revenue edged up 0.4% to $3.64 billion, topping Wall Street's view, as same-store sales were down a less-than-expected 4.2%.

The company 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 May 2, Kohl's operated 1,022 stores in 49 states, up 6.8% from a year earlier, and an increase of 18 since the end of January. The company plans to open an additional 37 stores later this year.

For the fiscal second quarter, the company expects earnings of 56 cents to 64 cents, while analysts were looking for 61 cents.

-By Tess Stynes, Dow Jones Newswires; 201-938-2473; tess.stynes@dowjones.com