Categories Analysis, Earnings, Retail

After holiday debacle, Kohl’s Corp. (KSS) needs to focus on ailing segments

Shares of Kohl’s Corporation (NYSE: KSS) traded at a two-year low on Friday as the ongoing selloff intensified after the management revised down its earnings outlook, discouraged by the dismal holiday sales.

Kohl’s (NYSE: KSS) Q3 earnings miss estimates, cuts FY19 profit view

Investor sentiment was hurt by a statement issued by the company earlier this week, showing negative comparable store sales for November and December, contrary to expectations for an increase. The management said it expects full-year profit to be at the lower end of the guidance issued earlier.

Challenging Year

Comparable sales were negatively impacted by softness in the women’s business during the holidays, which the company is reportedly “working with speed to address.” Overall, 2019 has been a challenging year for Kohl’s. With only a few more weeks left for the fiscal year to end, the final outcome might not be different from what the company predicted, indicating a 15% dip in earnings.

Also read: Alibaba posts solid Q2 results on strength of cloud

The good news is that the other segments, including men’s wear and kidswear, are performing relatively well, supported by the digital platform. The retailer needs to focus on building on the positive aspects of the business to get back on track in 2020. While the stock’s relatively low price offers a buying opportunity that many investors wouldn’t want to miss, analysts recommend hold. The average target price of $50 represents a 6% upside.

New Trend

The unimpressive sales trend at traditional store-operators, including Nordstrom (JWN) and J.C. Penney (JCP), shows that customers are turning to omnichannel players like Amazon (AMZN) and Walmart (WMT), mainly due to the convenience and superior shopping experience they offer. It also indicates that Kohl’s merchandising efforts and recent partnership with Amazon did not yield the desired results.

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The market will be closely following the company’s upcoming earnings event, which is expected in early March, for updates on its strategy to attract customers to the stores. It is estimated that Kohl’s is losing market share to fellow retailer Target Corporation (TGT).

Guidance Cut

Recently, the company slashed its full-year earnings guidance after third-quarter profit dropped and missed the estimates. Earnings contracted 20% annually to $0.78 per share, while revenues remained unchanged at $4.63 billion.

Related: Kohl’s Corp. Q3 2019 Earnings Conference Call Transcript

Kohl’s stock plunged 32% in the past twelve months and hit a new low this week, losing about 9% in January alone. That leaves the company trailing far behind Target, which has been gaining consistently for more than a year. Still, Kohl’s has fared better than troubled store-operator Macy’s (M), which is struggling to recover from a multi-year low. On Friday, Kohl’s regained a part of the lost momentum and traded higher in the afternoon.

Listen to publicly listed companies’ earnings conference calls along with the edited closed caption text

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