(Reuters) - Department store operator Kohl's Corp <KSS.N> reported a lower-than-expected quarterly profit, hit by higher costs and store closures due to hurricanes, sending its shares down 7 percent and dragging the sector down.
Sales at Kohl's stores open at least 12 months, however, returned to growth after six quarters of declines, surprising analysts who had expected another quarter of decline.
Department store chains have been struggling as fewer shoppers visit malls, opting for the convenience and savings that online shopping provides.
To counter that, Kohl's has focused on revamping beauty departments at its stores and bringing in popular brands such as Under Armour <UAA.N>.
Same-store sales rose 0.1 percent in the third quarter, while analysts had expected a decline of 0.7 percent, according to Thomson Reuters I/B/E/S.
The rebound in sales, however, was clouded by a 20 percent decline in net income as cost of merchandise sold and selling and general expenses increased.
Net sales were largely flat at $4.33 billion, while earnings per share came in at 70 cents per share. Analysts on average had expected a profit of 72 cents per share on revenue of $4.30 billion.
Kohl's also increased the lower end of its profit forecast for the year ending January 2018. It now expects adjusted profit of $3.60 to $3.80 per share, compared with its previous forecast of $3.50 to $3.80.
Shares of upmarket rival Macy's, which is scheduled to report results later on Thursday, were down 2 percent.
(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Saumyadeb Chakrabarty)