Kohl's (KSS.US) reported better-than-expected Q3 earnings on Tuesday and raised its full-year guidance for the second consecutive quarter, signaling that new CEO Michael Bender is helping the struggling retailer regain its footing.

The company's Q3 sales fell 2.8% year-over-year to $3.41 billion but still surpassed analysts' estimates of $3.32 billion. Comparable store sales declined 1.7%, significantly better than the anticipated 3.9% drop. Gross margin as a percentage of net sales improved by 51 basis points year-over-year, while operating profit stood at $73 million, down from $98 million in the same period last year. Adjusted net income reached $11 million, or $0.10 per share, far exceeding the consensus estimate of a $0.17 loss per share.

Looking ahead, the retailer raised its fiscal 2025 adjusted EPS forecast from $0.50–$0.80 to $1.25–$1.45 and narrowed its projected annual sales decline from 5%–6% to 3.5%–4%. Following the earnings release, the stock surged about 27% in pre-market trading. Year-to-date, shares had already gained 12% as of Monday's close.

This week, Bender was officially appointed as permanent CEO after serving in an interim capacity. The upward revision in guidance suggests Kohl's is gradually recovering from recent turmoil, including the abrupt departure of its former CEO after a brief tenure.

Despite ongoing challenges—revenue has now declined year-over-year for 15 consecutive quarters—the latest results show signs of improvement, with the company emphasizing that its value proposition is resonating with consumers. Bender has largely continued the strategy set by his predecessor, Ashley Buchanan, including revitalizing the jewelry business and expanding small-size apparel offerings. Private-label sales grew 1% this quarter.

Additionally, Kohl's has strengthened partnerships with brands like Sephora, introducing trendy labels such as Selena Gomez's Rare Beauty, Prada-owned Miu Miu, and L'Oréal's (LRLCY.US) Kérastase to attract younger shoppers to its mid-tier department stores.

Bender stated, "Kohl's delivered another solid quarter, marking the third consecutive quarter of exceeding both revenue and earnings expectations. These results reflect the progress of our 2025 strategic initiatives and reinforce our confidence in moving in the right direction."

The broader retail sector has noted a shift in consumer behavior, with some tightening budgets while higher-income shoppers trade down to more affordable options—a trend that could benefit Kohl's, which generally offers lower prices than most department stores.

Buoyed by Kohl's strong performance, competitor Macy's (M.US) also saw its pre-market shares rise over 5%.