Can Kohl’s Q1 Results Help the Stock Recover?
Could Kohl’s 1Q16 Earnings Help the Stock Recover?
Stock down year-to-date
Kohl’s (KSS) stock has fallen 16.5% to $41.37 year-to-date as of May 6. The company’s stock suffered a major blow on February 4, when it fell 18.8% on news of lower-than-expected sales for 4Q15.
Comparison with peers
Kohl’s stock has underperformed its department store peers year-to-date. As of May 6, stock prices for Macy’s (M), Nordstrom (JWN), Dillard’s (DDS), and JCPenney (JCP) have appreciated by 5.2%, -4.1%, 1.7%, and 18.5%, respectively, since the start of 2016.
The First Trust Consumer Discretionary AlphaDEX Fund (FXD) has 1.2% exposure to Kohl’s. The FXD ETF has appreciated 1.9% since the start of 2016. Kohl’s has also underperformed the S&P 500 Index, which has appreciated 2.2% year-to-date as of May 6.
Analyst recommendations
Prior to Kohl’s 1Q16 results, which are scheduled for May 12, 13 out of 25 analysts covering the stock have a “hold” recommendation for Kohl’s. Eight analysts have a “buy” recommendation and four analysts have a “sell” recommendation. Kohl’s saw a subdued sales growth of 1% in fiscal 2015. The company’s adjusted earnings per share fell 5.4% in fiscal 2015.
Kohl’s had a weak sales growth outlook of -0.5% to 0.5% for fiscal 2016 due to a tough retail environment. Also, department stores are facing intense competition from online retailers like Amazon (AMZN) and off-price retailers like TJX Companies (TJX). As we discussed in Part 1 of this series, Kohl’s is undertaking several initiatives to improve its sales, including testing new smaller store formats. The company is also working on enhancing its productivity.
As of May 6, the 12-month price target for Kohl’s stock was $48.75. This price estimate indicates a 17.8% upside potential in the stock.
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