Nov. 15 (Bloomberg) -- Kohl's Corp., the fourth-largest U.S. department-store company, said profit fell for the first time in 3 1/2 years and lowered its 2007 earnings forecast as sales growth slowed.

Third-quarter net income dropped 14 percent to $194 million, or 61 cents a share, in the three months through Nov. 3, beating its own lowered forecast. A year earlier, profit was $224.5 million, or 68 cents, the Menomonee Falls, Wisconsin- based company said today in a statement.

Sales at stores open at least a year fell 2.6 percent in the quarter, the first decline since the second quarter of 2004. Consumers have cut spending to cope with higher housing, food and fuel costs, prompting J.C. Penney Co. and Williams-Sonoma Inc. to lower their forecasts for the holiday shopping season as well.

``People are still struggling to find a bottom for these earnings,'' said Lauri Brunner, an analyst at Thrivent Investment Management in Minneapolis, with $70.6 billion in assets including Kohl's shares. ``We see a lot of unraveling in the fourth-quarter earnings.''

Kohl's cut its full-year profit forecast to $3.52 to $3.58 a share from an earlier projection of $3.77 to $3.87. Same-store sales may drop as much as 2 percent in the fourth quarter, the company said.

Kohl's declined $1.42, or 2.9 percent, to $47.50 at 6:46 p.m. after the close of New York Stock Exchange composite trading. The shares fell 46 cents in regular trading before the release.

`Conservative' Outlook

President Kevin Mansell said on a conference call with analysts that the retailer was being ``conservative'' on its outlook for the quarter and the first part of next year.

He said Kohl's will respond to what he called a ``very promotional'' holiday season as rivals discount goods to lure customers.

Profit at J.C. Penney, the third-largest U.S. department- store chain, fell 9.1 percent after sales dropped, the Plano, Texas-based retailer said earlier today. J.C. Penney slashed its fourth-quarter forecast by as much as one-third.

Unusually warm weather hurt sales of coats and sweaters in the quarter, with cold weather gear posting ``double-digit'' declines, Mansell said.

Sales of jewelry and watches, beauty items and menswear gained, he said.

During the quarter Kohl's introduced two of its own new brands, Simply Vera by Vera Wang, and a Food Network line of kitchenware. Earlier this week it said it will add an exclusive line of clothing, shoes and accessories through a license with Fila Luxembourg S.a.r.l.

The Vera Wang line has attracted new, more affluent shoppers, Mansell said.

To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net.

Last Updated: November 15, 2007 18:56 EST