Citi cuts Kohl's price target to $18, maintains neutral stance

On Monday, Citi updated its stance on Kohl's Corporation (NYSE:KSS), lowering the price target to $18 from the previous $19 while maintaining a Neutral rating on the stock. The adjustment comes ahead of the company's third-quarter earnings report, which is anticipated to align closely with consensus expectations.

According to the firm, Kohl's third-quarter earnings per share (EPS) are projected to be $0.30, slightly below the consensus estimate of $0.31. Comparable store sales (comps) are expected to decline by 5.0%, which aligns with consensus forecasts and falls within the company's own guidance of a 2-5% decrease. The change in price target reflects these expectations and the belief that management will likely set full-year 2024 (F24) guidance for comps and EPS at the lower end of its previously stated range.

The analysis suggests that warmer weather may have negatively impacted apparel sales, a key category for Kohl's. Additionally, data from Placer indicating a sequential slowdown in foot traffic during the quarter supports the expectation of weaker performance. The second quarter had already seen a 5% drop in comps, and the trend appears to have continued into the third quarter.

Despite these challenges, the high level of short interest in Kohl's stock implies that it would require a significant earnings miss to further depress the stock price, which Citi does not foresee happening. The firm's outlook indicates that while there may be headwinds, a dramatic move in stock price is not expected based on the current data and market expectations.

In other recent news, Kohl's Corporation reported a 13% increase in Q2 2024 earnings despite a 5.1% decline in same-store sales. Analysts from TD Cowen and JPMorgan have downgraded the company's stock due to persistent negative sales trends. TD Cowen maintains a "hold" rating with a price target of $21.00, while JPMorgan downgraded the stock to "underweight" with a price target of $19.00.

Baird also adjusted its outlook on Kohl's shares, reducing the price target to $25 from $27, while maintaining an "outperform" rating. Despite the challenges, Kohl's revised its full-year 2024 EPS outlook upwards to $1.75-$2.25, surpassing the previous guidance of $1.25-$1.85.

On another note, TD Cowen reiterated its "buy" rating and $40.00 price target for Bath & Body Works Inc. The firm highlighted the company's strategic positioning amidst potential ocean freight challenges.

In other developments, Deutsche Bank (ETR:DBKGn) lowered its price target on Gerresheimer stock while maintaining a "buy" rating amid cautious guidance. These recent developments highlight the ongoing shifts in the retail industry, as companies navigate various challenges and opportunities.

InvestingPro Insights

Recent data from InvestingPro adds depth to Citi's analysis of Kohl's Corporation (NYSE:KSS). The company's current P/E ratio of 6.75 suggests it's trading at a low earnings multiple, which could be attractive to value investors despite the challenges outlined in the article. This valuation metric aligns with one of the InvestingPro Tips, indicating that Kohl's is "trading at a low earnings multiple."

Additionally, Kohl's boasts a significant dividend yield of 11.11%, as reported by InvestingPro. This high yield is particularly noteworthy given another InvestingPro Tip that highlights Kohl's has "maintained dividend payments for 14 consecutive years." This consistent dividend history may provide some reassurance to investors in light of the anticipated earnings challenges.

However, reflecting the concerns raised in the article about potential weaker performance, InvestingPro data shows that Kohl's has experienced a 13.46% price decline over the past month and is currently trading at 58.75% of its 52-week high. These figures corroborate the cautious outlook presented by Citi.

For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips on Kohl's, providing a broader perspective on the company's financial health and market position.

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