Maybe this time is different for Kohl's maybe a sub-5x multiple to estimated earnings for this year indeed is too cheap.īut we've heard that story before. The S&P 500 rallied 190%.ĭuring that period, over and over investors believed that stocks like KSS were simply “too cheap.” With few exceptions, they were proven wrong. During the 2010s, shares lost 5.6% of their value. Before the pandemic, KSS stock went nowhere. The market has rapidly adjusted to the 'new normal' for retail-which, unfortunately, may look a lot like the old normal.Īnd that gets to the core problem here. Macy's (NYSE: M) has lost almost one-third of its value. And retailers of all stripes have plunged from where they traded at the beginning of the year. And, to be fair, that alone suggests that a price below $30 is simply too cheap.īut Kohl's itself has ended the bidding process. Now, again, it was only six months ago that bidders were offering $60-plus per share to acquire Kohl's. It's a big risk to profits going forward. That was a huge boost for Kohl's earnings when sales were strong last year. And the nature of the retail model means that relatively small movements in sales lead to big movements in profits. In short, it may get worse before it gets better for retailers like Kohl's. air travel broke records over the July 4 weekend. With normalcy returning, spending is pivoting back toward travel and entertainment. Yet all of the evidence we have in retail-whether looking at mall retailers like American Eagle Outfitters (NYSE: AEO), or e-commerce leaders like Amazon (NASDAQ: AMZN)-suggests that a) the consumer is getting weaker and b) that consumer already owns too many things. After Q1, Street estimates imply basically flat profit growth for the last three quarters of the year. Wall Street expects full-year profits to decline by 12%.Įven that estimate looks too conservative. The same inventory problems that dogged Target showed up in Kohl's first-quarter report: inventory climbed $1 billion, or 37% year-over-year. Kohl's profits aren't going to fall 90% for the full year, but they're going to decline. Adjusted EPS badly missed consensus estimates, and declined 90% year-over-year. Meanwhile, Kohl's itself posted a sharply disappointing first quarter to begin fiscal 2022. Remember that Kohl's earnings actually declined in fiscal 2019. Wall Street now expects Target's profits to decline 36% this year. So far in calendar 2022, Target has cut its guidance for profit margins twice. Target (NYSE: TGT) posted adjusted earnings per share of $13.56 in its fiscal 2021-up more than 100% from the $6.39 figure posted in FY19. As a result, they spent heavily on merchandise of all kinds. Between sharply lower spending on travel and entertainment, plus stimulus payments from the federal government, U.S. Obviously, fiscal 2021 results for Kohl's benefited from the country's response to the pandemic. Are Kohl's Earnings Set To Plunge?īut in fact, there is some evidence that results may be headed south. There doesn't seem to be much evidence in the results of the last few years to suggest Kohl's is on the precipice of such a decline. Indeed, a 4x earnings multiple suggests a business in sharp decline, rather than in growth mode. That kind of combination isn't available often in this market-or in any market. Taking a purely fundamental perspective, KSS stock trades for 4x earnings despite those earnings growing 9% annually over a three-year stretch. The two-year earnings growth rate between FY19 and FY21 was about 23% go back a year and the growth rate still is over 9%. Then, last year, adjusted EPS soared to $7.33. Even on an adjusted basis (which backs out store closure costs, gains and losses on real estate sales, and other factors), Kohl's lost $1.21 per share. In FY19, adjusted EPS declined 13% to $4.86.įiscal 2020 of course was impacted significantly by the novel coronavirus pandemic. 31 of the following year), on an adjusted basis, Kohl's posted earnings per share of $5.60. In fiscal 2018 (Kohl's fiscal years end on the Saturday closest to Jan. Surely, the bidders willing to pay $60-plus six months ago weren't that wrong. That was even after the company rejected buyout offers earlier this year, including one made in January for $64 in share. And less than four months ago, the Menomonee Falls, Wisconsin based retailer was the subject of a bidding war.
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