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Kohl's Corp. has agreed to sell its credit card accounts to JP Morgan Chase for about $1.5 billion. But the Menomonee Falls department store chain said Monday that it will continue to run the program and will not eliminate any jobs at its headquarters.

Kohl's plans to use the proceeds from the sale to repurchase shares. The company's board of directors has approved a $2 billion share buyback program that is to run two to three years.

It will be the first buyback of shares in company history.

Kohl's also raised its earnings guidance for the year, to a range of $2.74 to $2.87 a share, up from a projection of $2.72 to $2.85. The average estimate of analysts had been $2.80.

After the announcement, Kohl's shares closed up $1.73, or 3.55%, at $50.53.

Under the agreement, Chase will purchase the debt outstanding on Kohl's charge cards in a transaction expected to close within 90 days. But Kohl's will continue to administer the program and to keep its call center and related credit card operations at its headquarters.

The company would not say how many people work in the credit operation.

"We do not disclose head count by department," said Vicki Shamion, vice president of public relations. "What is important is we expect to maintain our current structure and we expect to grow as we grow that business."

Chairman Larry Montgomery said the transaction would strengthen the balance sheet and allow Kohl's to maintain contact with its credit card customers.

The Kohl's decision to sell the credit card receivables follows a recent trend among retailers. Sears Roebuck & Co., Federated Department Stores Inc., Bon-Ton Stores Inc. and Saks Inc. are among the chains that have sold their credit card businesses to financial companies.

"It allows them to free up cash on their balance sheets," said Keri Spanbauer, a senior equity analyst with Thrivent Investment Management in Appleton.

In a conference call with analysts, Montgomery said the anticipated increase in profits will result from a savings of $250 million to $300 million that Kohl's has been spending to fund the receivables.

David Cumberland, an analyst with Robert W. Baird & Co., said: "The market likes both announcements. For non-finance companies, such as retailers, the market tends to place a low valuation on the credit parts of their business."

Investors' concerns about the risks of running a credit card business tend to outweigh the benefits of the profits, although there wasn't much worry about the credit card portfolio at Kohl's, Cumberland said.

Customers will see no change as a result of the deal with Chase. About 40% of all sales at Kohl's stores are made with a Kohl's charge card.

Chief Operating Officer Arlene Meier said analysts have been asking Kohl's to sell the credit card business for about two years.

"We've been looking at transactions that other retailers have done," Meier said. "We wanted a partner who would allow us control with customers."

Meier said the agreement with Chase will enable Kohl's to benefit from the bank's data mining capabilities and design marketing initiatives.

# posted by Medical Information : 4:18 AM