Dive Brief:

• Kohl’s on Tuesday reported first-quarter earnings that beat expectations, with revenues up 3.5% from the year-ago period to reach $4.2 billion. Same-store sales in the quarter rose 3.6%, well above the 2.7% rise anticipated by Thomason Reuters. 

• The retailer’s net income in the quarter rose 14% from the year-ago period to $75 million, according to a company press release. The company raised its adjusted fiscal 2018 diluted earnings guidance to $5.05 per share to $5.50 per share, up from its prior guidance of $4.95 per share to $5.45 per share, the company said.

• The discount department store is also embarking on a new partnership: POPSUGAR at Kohl’s. The new apparel line is aimed at attracting millennials with engaging shopping and marketing experiences.

Dive Insight:

Like many in the retail sector, Kohl’s is benefiting from weak performance at this time last year, but analysts say the department store retailer also deserves credit for new initiatives that have increased foot traffic and spending.

"This shift is important as it suggests the recovery at Kohl's is deep-rooted and not just based on existing customers spending more thanks to tax cuts and bonuses," GlobalData Retail Managing Director Neil Saunders said in comments emailed to Retail Dive, noting that GlobalData’s research shows that Kohl's is attracting more shoppers, including among younger shoppers and families.

The company's partnership with Amazon has helped bring in millennials, and its launch of POPSUGAR is aimed at further resonating with those shoppers, Saunders said. "This is a smart move and one that has echoes of Target's various partnerships with notable brands," he said.

Product and inventory levels are noticeably improved, according to a note from Jane Hali & Associates emailed to Retail Dive. Its Nike and Adidas assortments are strong across women’s, men’s and kids, with a larger emphasis on fitness/wellness brands, they also said.

Thanks to proactive initiatives like merchandising and loyalty improvements, as well as ongoing efforts to cut costs and pullback on promotions, it’s likely to be a "reasonable" year for the company, Saunders said. Its stores’ locations away from malls with parking lots that provide easy access to the front door will also help continue to buoy the retailer in the face of pressure in the discount market.

Kohl's is also poised to challenge competitors like Macy's online, according to new research from SimilarWeb. When combining direct and branded search traffic, 61% of all traffic to macys.com arrived deliberately and 71% to kohls.com. While macys.com receives a higher overall volume of traffic, the average monthly volume of branded traffic for the two sites is almost equal with 39.3 million for kohls.com and 39.1 million for macys.com, which indicates that both benefit from strong brand awareness and loyalty, and potentially visitors with higher intent to buy.