Market Overview

Goldman Still Worried Long-Term Profit Headwinds Remain At Kohl's

Share:

Goldman Sachs reiterated its Sell rating on Kohl's Corporation (NYSE: KSS), despite better second quarter comp and profitability, saying that long-term profit headwinds still remain.

"The sequential comp improvement does not signal a path to positive comps near-term, in our view, as structural pressures like declining traffic and online/off-price competition weigh," analyst Lindsay Drucker Mann wrote in a note.

Goldman's analysis of Kohl's historical comp trends indicates that sequential comp improvements of 200 bps or more (as this one was) are typically followed by sequential decelerations on average of -150 to -200 bps.

Related Link: Kohl's Shows Q2 Sales Above Estimates While Earnings Rise 14%

Though the analyst doesn't model a sequential deterioration in the third quarter comps sales trends, it appears unlikely that Kohl's can stabilize comp sales trends from here, especially under pressured store traffic.

Meanwhile, the analyst said rival Macy's Inc (NYSE: M) decision to close 100 stores in early 2017 could be disruptive to Kohl's business due to liquidation of excess inventories, but it's likely to get positive thereafter. Macy's has guided to $1 billion of lost sales.

"We estimate $1.3bn of gross sales (assuming a 25% recapture rate), which equates to 7% of KSS's annual sales. A minimum comp impact of 100-200 bps next year to KSS's 1H17 seems plausible," Mann highlighted.

Mann raised FY16/17 EPS estimates to $3.84/$3.61 from $3.66/$3.37, reflecting the second quarter beat and more favorable gross margin behavior due to cleaner inventories.

The analyst also upped the target price by $2 to $35 on upward EPS revisions.

At time of writing, shares of Kohl's rose 2.10 percent to $45.12.

Latest Ratings for KSS

DateFirmActionFromTo
Aug 2019MaintainsNeutral
Aug 2019MaintainsUnderweight
Aug 2019MaintainsHold

View More Analyst Ratings for KSS
View the Latest Analyst Ratings

Posted-In: Goldman Sachs Lindsay Drucker MannAnalyst Color Earnings News Price Target Reiteration Analyst Ratings

 

Related Articles (KSS + M)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
LGIHBTIGReiterates65.0
NXSTBenchmarkMaintains150.0
ANIKFirst AnalysisDowngrades
HUNAlembic GlobalAssumes
POOLStephens & Co.Reiterates196.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

First Came Brexit. Next Comes Crexit?

GBP/USD Erases Gains