Updates shares, adds executive comments

By Sanskriti Shekhar and Danielle Kaye

May 28 (Reuters) - U.S. department store chain Kohl's KSS.N stuck to its annual targets after posting a smaller-than-expected first-quarter loss on Thursday, signaling that turnaround efforts under new CEO Michael Bender have started to pay off.

Kohl's shares, which have declined about 37% this year through Wednesday, climbed more than 15% in early trading; investors welcomed signs of improving sales trends, including the retailer's best comparable sales performance in more than four years.

Comparable sales fell 1.1% while net sales slid 1.7% to $3 billion for the quarter ended May 2, in line with estimates.

The company named Bender permanent CEO in November to revitalize the business after years of sliding sales and shrinking profit and loss of ground to Amazon and off-price competitors.

Kohl's has lost about 80% of its market value in the past five years amid a series of challenges, including strategic missteps, supply chain issues and uneven demand for discretionary items.

Bender said earlier this year that he planned to cut unproductive styles and focus more on basics.

Simultaneously, Kohl's has been reviving categories like jewelry and accessories and expanding its Sephora partnership to win back loyal shoppers and attract younger customers. It has also partnered with influencers and offered products from celebrities like Bilie Eilish.

Now the focus is on expanding proprietary brands to appeal to value-seeking shoppers who "remain under final pressure," Bender said on Thursday's post-earnings call with analysts.

Low- and middle-income consumers continue to stretch their dollars as "more of their money is being spent on essentials like food and gas," the CEO added.

U.S. consumer sentiment hit a record low in May and inflation reached a three-year high. Big-box retailers such as Walmart WMT.O and Target TGT.N have signaled weakening consumer health, hit by rising fuel costs amid the U.S.-Iran war.

Still, higher-income households continue to spend, as reflected in recent retail earnings from Abercrombie ANF.N and Ralph Lauren RL.N.

Kohl's said it continues to expect annual net sales to remain flat or decline up to 2%. It also sees annual earnings per share between $1.00 and $1.60.

Despite improvements in inventory management and private-label sales, however, Kohl's executives cautioned that the Sephora partnership fell short in the most recent quarter, as did its footwear and skincare businesses.

"While trends are encouraging, we are not satisfied with where we are," Bender said.

Kohl's reported a loss of 13 cents per share, the same as a year ago, but its total net loss narrowed to $14 million from $15 million a year earlier. Analysts on average had expected a loss of 19 cents per share, according to data compiled by LSEG.

"Against a backdrop of low expectations, this is a modestly better result," analysts at Goldman Sachs wrote in a note.

Kohl's is eligible for $190 million in tariff refunds but has not yet received refund payments, CFO Jill Timm told analysts on Thursday.