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Multiple department stock stocks are down around 60% since the start of 2020, but differentiated stores like Kohl's Corporation (NYSE:KSS) have upside potential moving forward, according to BofA Securities.
The Kohl's Analyst: Lorraine Hutchinson upgraded Kohl's from Neutral to Buy with a price target lifted from $20 to $27.
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The Kohl's Thesis: Kohl's stands out from other department stores, as 95% of locations are in the off-mall format, Hutchinson said in the upgrade note. (See her track record here.)
As of June 9, 90% of its store fleet had reopened, and these locations were running at 75% of last year's volumes, the analyst said. Encouragingly, stores that opened the earliest are showing superior trends, she said.
Online sales were up 24% in the first quarter, up 60% in April and up 90% in May, Hutchinson said.
The case for buying Kohl's stock is also based on its "relatively healthy" balance sheet, which includes $2 billion in cash and net debt of $2.9 billion versus $2.6 billion at the end of the fourth quarter, the analyst said.
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The company should be able to keep near-term cash burn "in check," in part from a reduction in capex from prior plans of $750 million to $250 million, she said.
Finally, Kohl's lease-adjusted debt/EBITDA stands at 2.6 times, which makes it "one of the healthiest" balance sheets in the group, according to BofA Securities.
KSS Price Action: Shares of Kohl's were trading higher by 5.37% at $21.38 at the time of publication Wednesday.
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Public domain photo via Wikimedia.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.