Kohl’s Stock To $16?

Kohl’s (KSS) stock has jumped 43% during the past day, and is currently trading at $22.42. Our multi-factor assessment suggests that it may be time to sell KSS stock. We have, overall, a pessimistic view of the stock, and a price of $16 may not be out of reach. We believe there is a lot to fear in KSS stock given its overall Very Weak operating performance and financial condition. Hence, despite its Low valuation, we think that the stock is Unattractive.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $2.5 Bil in market cap, Kohl’s provides branded apparel, footwear, accessories, beauty, and home products through about 1,100 stores and online, serving customers across the United States.

[1] Valuation Looks Low

This table highlights how KSS is valued vs broader market. For more details see: KSS Valuation Ratios

[2] Growth Is Very Weak

• Kohl’s has seen its top line shrink at an average rate of -5.6% over the last 3 years
• Its revenues have fallen -7.2% from $17 Bil to $16 Bil in the last 12 months
• Also, its quarterly revenues declined -5.0% to $3.5 Bil in the most recent quarter from $3.7 Bil a year ago.

This table highlights how KSS is growing vs broader market.

[3] Profitability Appears Very Weak

• KSS last 12 month operating income was $521 Mil representing operating margin of 3.3%
• With cash flow margin of 5.7%, it generated nearly $907 Mil in operating cash flow over this period
• For the same period, KSS generated nearly $208 Mil in net income, suggesting net margin of about 1.3%

This table highlights how KSS profitability vs broader market.

[4] Financial Stability Looks Very Weak

• KSS Debt was $6.9 Bil at the end of the most recent quarter, while its current Market Cap is $2.5 Bil. This implies Debt-to-Equity Ratio of 273.9%
• KSS Cash (including cash equivalents) makes up $174 Mil of $13 Bil in total Assets. This yields a Cash-to-Assets Ratio of 1.3%

[5] Downturn Resilience Is Very Weak

KSS has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• KSS stock fell 71.8% from a high of $63.71 on 24 January 2022 to $17.99 on 1 June 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $29.36 on 27 December 2023 , and currently trades at $22.42

 
2020 Covid Pandemic

• KSS stock fell 77.4% from a high of $50.95 on 1 January 2020 to $11.51 on 3 April 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 8 February 2021

 
2008 Global Financial Crisis

• KSS stock fell 68.3% from a high of $78.89 on 20 April 2007 to $24.98 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 2 April 2015

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read KSS Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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