Kohl's Earnings: Will Poor Same-Store Growth Bring it down?

Kohl's posted better earnings numbers than expected Thursday, but slumping same-store sales pose potential problems for the department store.

The Wisconsin-based chain reported profits increased 17 percent, thanks to the success of its Vera Wang and Food Network brands. It posted earnings of $303 million, or $1.09 a share, beating analyst expectations of $1.05 a share.

The company also expects to unveil a new Jennifer Lopez and Marc Anthony clothing line in mid-November -- even though the celebrity couple has broken up.

"We believe that both brands will resonate strongly with our existing customers and drive new customers into our stores," Kohl's chief executive Kevin Mansell said in an earnings conference call.

Despite the success, there are less encouraging statistics.

The key figure to look at is same-store sales -- numbers for stores open at least a year -- and Kohl's doesn't particularly impress on that score.

Kohl's same-store sales were up 1.9 percent, missing analyst expectations of a 2 to 4 percent bump, as well as comparable-store sales dropping 4.6 percent.

Same-store sales growth is one of the biggest indicators of a store's potential growth, as investors like to key in on stores that continue to grow over time.

Companies can boost profits and revenue by opening more and more stores, as seen in the past with Boston Chicken and Krispy Kreme, but it is a store's same-store sales growth that shows the real picture.

A perfect case in point is the battle of coffee supremacy between Dunkin' Donuts and Starbucks. In its most recent quarter Starbucks posted growth of 8 percent, while Dunkin' Donuts managed only a 3.8 percent sales growth.

This is why investors are more bullish on Starbucks and its international expansion plans, than Dunkin' Brands and its domestic goals, despite an initially strong IPO by Dunkin'.

Kohl's has managed to do relatively well in a worsened economic setting, but it will need continued strong growth in same-store sales in order to succeed.

Jeffries & Co. downgraded the company on Wednesday, citing the chain's vulnerability in the economy, but Wall Street reacted differently.

Kohl's stock went up 7.53 percent to 47.74 at 2:30 p.m. trading Thursday.