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Kohl's target cut to $27 from $32 at Baird, maintains Outperform rating

EditorFrank DeMatteo
Published 2024-05-31, 09:50 a/m
KSS
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On Friday, Baird made adjustments to its outlook on Kohl's Corporation (NYSE:KSS), reducing the price target to $27.00 from the previous $32.00. The firm kept an Outperform rating on the stock, despite acknowledging the challenges faced by the retailer. The revision follows Kohl's release of first-quarter results that did not meet expectations, prompting a significant reduction in the company's annual earnings guidance.

The recent financial disclosure showed a 35% decrease in expected earnings per share (EPS), a development that has prompted Baird to revise its estimates. The analyst from Baird noted the difficulty of executing a turnaround in a volatile market and pointed out the growing gap between the company's management tone and the actual results and guidance. This discrepancy is expected to impact investor sentiment until there is clearer visibility on potential sales growth.

Kohl's is currently in the midst of a strategic revamp under the leadership of CEO Michelle Gass. The Baird analyst expressed the view that while the path to recovery may not be smooth, the stock could find some level of support in the near term. This support is anticipated to come from a 10% dividend yield, which appears to be sustainable based on the company's free cash flow.

The retailer's stock may face headwinds until it can demonstrate a positive trajectory in comparable store sales. In the meantime, the revised guidance is seen as a more cautious approach that could help manage investor expectations. Kohl's has not provided any further comments on the updated price target or the analyst's remarks.

In other recent news, Kohl's Corporation has been the subject of several analyst adjustments following a challenging first quarter. Telsey Advisory Group cut its price target for Kohl's to $23 from $28, maintaining a Market Perform rating. This came after the company reported weaker sales and increased expenses, causing a significant earnings miss. Jefferies also reduced its price target from $23 to $19, retaining a 'hold' rating, while Evercore ISI adjusted the price target to $22.00 from $24.00, maintaining an "In Line" rating.

Despite the disappointing start to the fiscal year, Kohl's did see some positive developments. The company managed its inventory effectively, resulting in a 60% increase in Sephora sales and over 20% rise in comparable sales for the first quarter. Furthermore, the company reported strong sales growth in underpenetrated categories such as home décor, gifting, and impulse.

However, due to the difficult start and an uncertain consumer environment, Kohl's has revised its full-year 2024 guidance downwards for both sales and earnings per share (EPS). The revised outlook reflects the ongoing challenges the company faces in a tough macroeconomic climate. The company also plans to launch a partnership with Babies R Us in the third quarter, which is expected to enhance its baby gear and accessories offerings.

InvestingPro Insights

As Kohl's Corporation (NYSE:KSS) navigates through its strategic overhaul, real-time data from InvestingPro provides further context to the revised analyst outlook. With a market capitalization of $2.33 billion and a P/E ratio of 7.21, Kohl's appears to trade at a low earnings multiple, which aligns with Baird's maintained Outperform rating despite the price target adjustment. The company's significant dividend yield of 9.51% supports the analyst's view of potential near-term support for the stock, especially considering that Kohl's has maintained dividend payments for 14 consecutive years.

An InvestingPro Tip highlights that the stock has experienced a notable decline over the last week, with a 1 Week Price Total Return of -20.65%. This volatility is a point of interest for investors, as it may indicate market reactions to both the earnings miss and the revised guidance. Additionally, the valuation implies a strong free cash flow yield, which could be a silver lining for investors looking for value opportunities. For those seeking more insights, InvestingPro offers additional tips on Kohl's, and users can access them with a special offer: use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 11 more InvestingPro Tips available for Kohl's, providing a comprehensive analysis for informed investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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