Kohl's Corp. (NYSE:KSS), the value-oriented specialty department store chain that has been quietly forging ahead in sales through the latter part of this recession, is poised to continue to do well as this recession ends and the economy eventually gets into recovery. While the chain has seen some earnings falloff in the last year due to the unfavorable economy, it continues to show more resiliency than some of its competitors.

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Positive Sales in a Negative Environment
In the notes for the recent year-over-year August sales figures for retailers, Kohl's was one of the few notable positives, as its sales were up 0.2%. Others, such as Macy's (NYSE:M), were down 8.1%, while JC Penney (NYSE:JCP) was off 7.9%. For the bigger picture of the year-to-date, Kohl's was up 1.8%, although its comps were off 2.7%. Still, in the relative economics of the recession, these are encouraging numbers and hint at a healthy trend. Also, Kohl's earnings estimates for the upcoming quarters are along these mildly positive lines.

Kohl's Competitive Edge
Kohl's is regarded as a leading value-price apparel retailer, which is no small feat, given that there are so many specialty apparel retailers focused on that alone. Also, Kohl's has always had a clear sense of its mid-line place and identification within the department store universe, unlike, for example, JC Penney, which has often been undecided as to whether to be a value-store or a mid-line store. Recently, JC Penney added a value element with its new "She Said" line of clothing for working women. Kohl's, which had stellar earnings numbers and strong growth prior to the recession, looks set to pick up steam when the economy will eventually shift from recession to recovery.

Permanent Change?
This is not to say that Kohl's will resume the rapid growth it experienced before the recession, as commentators have prominently mentioned that the consumer's shift in spending habits may be, if not permanently downward, at least different. A note by Moody's indicated that even in the near term, department store sales in the second half of this year are likely still to come in with poor numbers, and while economists have suggested we may be looking at a very flat recovery when it happens, Kohl's still seems positioned relatively better than some of its rivals.

Department stores are addressing the shifting sands of the economy and their business in different ways. Sears Holding Co. (Nasdaq:SHLD), which has been troublesome for years, is trying out the third-party marketplace concept for its internet sales, in an attempt to broaden its reach there. Macy's, on the other hand, is not going in that direction, but will stick with its traditional retailing approach. Though both Macy's sales and earnings have been off to a greater degree than Kohl's, Macy's idea seems to be that staying the course will work when the economy does, too. And although discounters have done better than the traditional department stores throughout the recession, luxury department stores such as Nordstrom (NYSE:JWN) which has been hit, obviously, is defined by its high-end approach, and pins its hopes on a resurgence of its traditional customers.

Business Down; Stocks Up
Many of the retail stocks have already been highly bid up. Nordstrom is an example of a stock with an already fairly high price, as are most of the others, including Kohl's, which was trading near its 52-week high at $55.40. The PEs are correspondingly rich, too. Macy's trades at over 40-times earnings, while Kohl's is at a more reasonable, but still high, 20. So if you are a value investor, it's easy to see why these stocks are considered ahead of themselves. Watch for Kohl's to gradually increase its earnings in the next several quarters, but wait for a pull back in the stock price so you have a better buying opportunity. Even with a tighter retail marketplace, Kohl's should still outshine many of its competitors, long term. (For more, check out Analyzing Retail Stocks.)

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