Kohl’s Reports Disappointing Earnings

Kohl’s Corp. (Ticker symbol: KSS) reported disappointing quarterly earnings that missed on the top and bottom lines. The Menomonee Falls, Wisconsin based company reported an earnings per share miss of .74 cents per share vs. Wall Street analysts’ expectations of .86 cents per share. Additionally, the American department store retail chain reported a revenue miss of $4.36 billion vs. Wall Street analysts’ expectations of $4.40 billion. Kohl’s also reported disappointing same-store sales with growth of 0.4%, which was less than the 0.8% growth that Wall Street was looking for.

Kohl’s also gave an update on its earnings guidance for its shareholders. Kohl’s is now forecasting its fiscal 2019 earnings to be in a range between $4.75 to $4.95, which is down from its prior range of $5.15 to $5.45 per share. The new forecast is also less than Wall Street analysts’ expectations of $5.19 per share.

Kohl’s has also partnered with some celebrities to help generate hype in the launching of some of its new brands. Kohl’s will begin making a home goods line as well as a new pet brand that will have pet costumes and play toys. Additionally, Kohl’s has been working with Amazon to begin accepting Amazon returns in its stores and now has that option in the majority of its U.S. locations.

The above image is a chart of Kohl’s stock roughly over the past ten years. The stock spent from 2010 until the first quarter of 2015 trading in a horizontal channel within the price ranges $40.00 and $60.00 respectively. Horizontal channels are continuation patterns and are areas of indecisiveness between buyers and sellers. The stock is at a point at which supply and demand are relatively balanced and the stock’s price trades within a certain range. Kohl’s broke out from that range in the first quarter of 2015. The rally was short-lived and the stock proceeded to pull back over the course of the next two years while forming a double bottom reversal pattern.

Some traders use what’s called a “measured move” to try and project where the stock might go in the future based on breakouts from technical formations. In Kohl’s case, one would take the bottom price from the double bottom pattern (roughly $35) and the price of the neckline from the pattern (roughly $60) then subtract them to get the difference ($25). The difference is then projected from the neckline in the direction of the breakout to project the price of the measured move (Neckline + Difference = Measured Move). In Kohl’s case, the projected price target from the double bottom pattern was $85.00, which the stock has yet to achieve. The stock broke out of its pattern and began to trade higher, eventually trading to an all-time high of $83.28 on November 12th, 2018. Since then, Kohl’s has been making a series of lower highs and is currently negative for the year.

(Chart above courtesy of ​www.tipranks.com​)

Based on a survey of 14 analysts offering 12-month price targets, the average price target for Kohl’s’ stock is $50.79. According to that number, the stock is priced at a discount relative to Wall Street analysts and could be considered undervalued around current levels near $47.34.

Investors in Kohl’s should look to their next earnings release on March 3rd for fresh news within the company.

 


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