MILWAUKEE (AP) -- Kohl's Corp. said Thursday its third-quarter profit fell 17 percent as revenue dropped amid the consumer pullback, and it lowered its outlook for what it said would be "the most challenging" holiday season in years.
The department store chain said it earned $160.2 million, or 52 cents per share, during the three months ending Nov. 1. That was down from the same period last year, when Kohl's earned $194 million, or 61 cents per share.
But the earnings beat the expectations of analysts. Thomson Reuters had predicted earnings per share of 51 cents. Revenue slipped less than 1 percent to $3.8 billion.
Same-store sales - a key figure in retailing that measures sales at stores open at least a year - fell 6.7 percent in the quarter.
President and Chief Executive Kevin Mansell said in a statement that the company remains conservative in its sales expectations for the fourth quarter.
Kohl's lowered its guidance for the quarter, which includes the all-important holiday season, saying it assumes same-store sales will fall between 8 percent and 12 percent. It also lowered its outlook for the year.
"We expect the holiday season to be the most challenging in years and will be very competitive in order to gain market share," Mansell said.
The current quarter's performance includes strong inventory management, Mansell said, better control of expenses and increased penetration of private label and exclusive brands - like Simply Vera Vera Wang - which improve margins.
Mansell told investors on a conference call that Kohl's last week launched its most aggressive holiday marketing campaign in the company's history. He said the campaign will feature aggressive discounting, frequent sales and an easier online shopping experience.
He said the company has increased its marketing budget - though he wouldn't say by how much - by shifting other sales-related expenses.
"We believe it's going to be a very promotional and very challenging environment," he said.
The company is touting the value of its offerings in its holiday marketing. It includes television ads and signs in stores that point out gifts for people on a budget. It marks a shift from last year, when the company pushed luxury despite its reputation as a midlevel retailer.
During the quarter, accessories and children's items did the best, while women's and home items did the worst, he said. Regionally, Kohl's saw weakness in the South and Southwest, while the Midwest and mid-Atlantic regions led the company so far this year.
Kohl's finished the quarter with 1,004 stores in 48 states up from 914 stores in 47 states at the same time last year. The company has opened 75 stores so far this year. It expects to open about 50 stores in fiscal 2009 and remodel 60 stores.