On Thursday, Kohl's Corporation (NYSE:KSS) experienced a downward revision in its stock price target from Evercore ISI, following a disappointing earnings report for the first quarter. The firm adjusted the price target to $22.00 from the previous $24.00, while maintaining an "In Line" rating on the shares.
The retailer reported a first-quarter earnings per share (EPS) loss of $0.24, which was notably below the positive EPS of $0.07 anticipated by Evercore and $0.05 expected by the broader analyst community. Kohl's also saw a significant miss in same-store sales (SSS), which fell by 4.4%. This decline was much steeper than Evercore's projection of flat SSS and the consensus estimate of a 0.4% dip. The SSS downturn was attributed mainly to a substantial 600 basis points headwind from reduced markdowns compared to the previous year's excess clearance levels.
Despite the SSS miss, gross margin (GM) expanded by 50 basis points year-over-year to 39.5%, aligning with the consensus and slightly exceeding Evercore's forecast of 39.4%. However, selling, general, and administrative (SG&A) expenses deleveraged more than anticipated due to negative comparable sales, with the SG&A rate increasing by 110 basis points to 34.6% compared to Evercore's and the Street's expectations of 35.1% and 35.8%, respectively.
Credit income was a silver lining, coming in around $204 million, which was roughly in line with Evercore's estimate of $205 million. In light of these results, Evercore has also revised its fiscal year 2024 earnings per share estimate for Kohl's to $1.82, a decrease from the previous forecast of $2.82 but within the company's guidance range of $1.65 to $1.85.
InvestingPro Insights
Following the recent adjustments in Kohl's Corporation (NYSE:KSS) stock price target by Evercore ISI, it's worth noting some key metrics and insights from InvestingPro that could provide a broader perspective on the company's financial health and performance. According to real-time data, Kohl's has a market capitalization of $2.33 billion and offers a compelling price-to-earnings (P/E) ratio of 7.21, which suggests that the stock could be undervalued given the industry average. Additionally, the company boasts a robust dividend yield of 7.34%, reflecting its commitment to returning value to shareholders, as evidenced by its history of maintaining dividend payments for 14 consecutive years.
InvestingPro Tips highlight that Kohl's has a high shareholder yield and a valuation that implies a strong free cash flow yield. These factors, coupled with the company's significant dividend payments, might appeal to income-focused investors. However, it's important to consider that six analysts have revised their earnings downwards for the upcoming period, indicating potential concerns about future profitability. Despite these revisions, analysts predict that the company will remain profitable this year. For investors seeking comprehensive analysis and additional tips, InvestingPro offers a deeper dive into Kohl's financials and future outlook, with more tips available at: https://www.investing.com/pro/KSS. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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