On Wednesday, Telsey Advisory Group maintained a Market Perform rating for Kohl's Corporation (NYSE:KSS) stock with a steady price target of $23.00.
The decision follows Kohl's report of a difficult start to the fiscal year 2024, characterized by weaker sales and increased expense ratios, which led to a significant earnings miss in the last quarter.
Despite a gross margin uplift from stronger regular price sales, the comparable sales were adversely affected by around 600 basis points due to high levels of clearance sales in the previous year.
Kohl's has managed inventory effectively and witnessed a notable 60% growth in Sephora sales, which continued to contribute positively to profit margins. The company is also seeing positive early results from its strategy to expand into less developed categories.
However, given the soft beginning to the year and the persisting uncertainty surrounding consumer behavior, Kohl's has revised its fiscal year 2024 guidance downward, with anticipated sales and earnings per share (EPS) now significantly below those of fiscal year 2023.
The recent quarterly results and the lowered forecast highlight the ongoing difficulties Kohl's faces as it attempts to find stability and recover in a challenging economic landscape. This situation contrasts with the strong performances reported by its peers in the past weeks.
The price target set by Telsey is based on an 11.3 times multiple applied to the two-year forward EPS estimate of $2.03. This valuation compares to the recent near-term multiple of 11.5 times and the one-year near-term average of 10.0 times.
In other recent news, Kohl's Corporation experienced a series of financial adjustments following a challenging first quarter. Citi maintained a Neutral stance on Kohl's, projecting a second-quarter EPS of $0.47, slightly above the consensus of $0.45.
The firm also anticipates an upward revision of Kohl's fiscal year 2024 guidance due to the postponed implementation of the Consumer Financial Protection Bureau's late fee cap.
CFRA, Baird, Telsey Advisory Group, and Jefferies have all adjusted their price targets on Kohl's stock with CFRA reducing it to $20, Baird to $27, Telsey to $23, and Jefferies to $19. Despite the reductions, Baird maintains an Outperform rating, while the other firms hold a Neutral stance.
Kohl's also reported a significant increase in Sephora sales and growth in underpenetrated categories such as home décor and gifting. However, due to an uncertain consumer environment, the company has revised its full-year 2024 guidance downwards for both sales and EPS.
Meanwhile, Koss Corp. experienced a remarkable surge in its stock price, fueled by social media speculation, particularly from online influencer 'Roaring Kitty'. These developments provide a snapshot of recent events impacting both Kohl's Corporation and Koss Corp.
InvestingPro Insights
In light of Telsey Advisory Group's assessment, current InvestingPro data provides a broader financial perspective on Kohl's Corporation. With a market capitalization of approximately $2.19 billion and a price-to-earnings (P/E) ratio of 7.94, Kohl's appears to be trading at a low earnings multiple, which suggests a potentially undervalued stock. Additionally, the company's significant dividend yield of over 10% reflects a strong commitment to returning value to shareholders, a sentiment echoed by an impressive 14-year streak of maintained dividend payments.
InvestingPro Tips indicate that Kohl's valuation implies a strong free cash flow yield, which could be an attractive point for investors seeking cash-generating investments. However, analysts are anticipating a sales decline in the current year, which aligns with Kohl's own revised fiscal year 2024 guidance. It's also important to note that while the stock price has seen considerable volatility, with a 22.38% total return decline over the last three months, analysts predict the company will remain profitable this year.
For investors seeking a deeper dive into Kohl's financials and future outlook, InvestingPro offers additional tips and analytics. Currently, there are 9 more InvestingPro Tips available, which can provide further guidance on Kohl's investment potential.
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