Jefferies Cautious Ahead Of Kohl's Q3 Results, Notes 'Warm Weather Likely A Near-Term Detriment'
Shares of Kohl's plunged to a new 52-week low of $42.19 on Wednesday as investors and traders have a lower level of confidence in the company heading into its third-quarter report on Thursday morning.
Daniel Binder of Jefferies commented in a note that Kohl's stock has become "washed out" with buy-side expectations expecting a flat to down 1 percent comp and sell-side estimates also coming down. The analyst cited the "unseasonably warm weather" as being a "near-term detriment" on sentiment, especially when considering the retailer is "the most weather sensitive" name under his coverage.
Binder continued that Kohl's has already highlighted several initiatives to drive sales, including:
- 1. Doubling its loyalty member base
- 2. Focus on the active and wellness category
- 3. Price elasticity work by brand and product
- 4. Faster cycle times in juniors business
- 5. New vendor relationships
Binder noted that Kohl's management remains positive on its initiatives, but a sales slowdown seen across the entire sector adds to the uncertainty moving forward.
"Unless Q3 is significantly worse, we tend to think Kohl's shares will trade in a narrow range at these levels," Binder wrote. "We do not think management will get a lot less optimistic on the Q4 outlook given its plans. Frankly, this may not help the stock near-term as investors could view this as another set-up for a Q4 miss."
With that said, Binder is estimating Kohl's will earn $0.66 per share in the third quarter on revenue of $4.392 billion on flat same-store sales. By comparison, the Estimize community (based on 29 estimates) is projecting an earnings per share of $0.71 on revenue of $4.433 billion, while the Wall Street consensus estimate is looking for an earnings per share of $0.69 on revenue of $4.436 billion.
Shares remain Buy rated with a price target lowered to $57 from a previous $61.
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