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Kohl's Earnings, Outlook Offered 'Very Few' Silver Linings

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Kohl's Earnings, Outlook Offered 'Very Few' Silver Linings

Kohl's Corporation (NYSE: KSS) reported “very weak” results for 1Q16, with the comps missing the lowered estimates and the worst since 1Q09.

MKM Partners’ Patrick McKeever maintained a Neutral rating on the company, while lowering the price target from $44 to $39.

Disappointing 1Q16

McKeever mentioned a “relatively bright spot” was that inventories declines 2 percent per store, while management was able to reduce expenses in response to weak sales.

However, the analyst pointed out the rising wage pressures continued to be a cause for incremental concern, while stating that there didn't appear to be a catalyst “that would drive a meaningful inflection in fundamental trends.”

Related Link: Department Store Stocks Slammed As Q1 Results Look Abysmal

McKeever also noted the high dividend yield of 5.7 percent, although the analyst expects “ample free cash flow for buybacks and to support/grow the dividend.”

Traffic Deteriorated

Same-store sales fell 3.9 percent during 1Q, as compared to the estimate of 0.5 percent, while traffic declined 4.8 percent, partially offset by a 0.9 percent rise in average ticket.

“Unfortunately, the weak sales appear to reflect both macro and company specific factors, which could make a fix that much more difficult,” McKeever said.

The Outlook

Management reaffirmed its FY16 comp guidance of 0-1 percent, while stating that the remainder of the quarters for 2016 were expected to be better.

However, according to the MKM Partners’ report, “this seems too aggressive and could be a setup for future disappointments.”

Latest Ratings for KSS

DateFirmActionFromTo
Jun 2019DowngradesNeutralUnderweight
May 2019MaintainsNeutral
May 2019MaintainsUnderweight

View More Analyst Ratings for KSS
View the Latest Analyst Ratings

Posted-In: MKM Partners Patrick McKeeverAnalyst Color Price Target Analyst Ratings Best of Benzinga

 

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