Citi cuts Kohl’s stock price target to $11 from $14

On Tuesday, Citi analyst Paul Lejuez adjusted the price target for Kohl’s (NYSE:KSS) shares, reducing it from $14.00 to $11.00, while maintaining a Neutral rating on the company’s stock. According to InvestingPro data, the stock is currently trading near its 52-week low of $11.24, with a notably low P/E ratio of 5.09 and Price/Book of 0.33, suggesting potential undervaluation. For detailed valuation analysis and more insights, investors can access the comprehensive Pro Research Report available on InvestingPro. Lejuez expects Kohl’s fourth-quarter earnings per share (EPS) and sales to be roughly in line with the consensus. He predicts a fourth-quarter EPS of $0.72, which is slightly below the Factset consensus of $0.75 but within the company’s guided range of $0.65 to $0.95. With earnings scheduled for March 11, InvestingPro subscribers can access exclusive analysis and 14 additional ProTips to make informed investment decisions.

Kohl’s comparable store sales (comps) are anticipated to decline by 7.0%, which is in close agreement with the consensus estimate of a 6.9% decrease and falls within the guidance range of a 5-8% drop. Lejuez noted that, similar to other retailers, Kohl’s likely experienced a boost in sales of cold weather merchandise during the fourth quarter compared to the third quarter. Additionally, foot traffic data suggests a sequential improvement, with the forecast for fourth-quarter comps set at a 7% decline, an improvement from the 9% drop in the third quarter.

Looking forward to fiscal year 2025, the analyst expects the new CEO Ashley Buchanan to set realistic expectations and guide comparable store sales to a low single-digit decline, as opposed to being overly optimistic about top-line growth. For fiscal year 2024, Lejuez anticipates that Kohl’s will provide an EPS guidance range of $0.70 to $1.30, compared to the consensus estimate of $1.28.

Despite the high short interest in Kohl’s stock, which stands at 40% of the float, Lejuez does not foresee the fourth-quarter report triggering a short squeeze. This outlook comes as the company prepares to release its earnings, with investors and analysts watching closely for the actual performance figures and guidance for the upcoming fiscal periods. Notable metrics from InvestingPro show the stock has declined 54.74% over the past year, while maintaining a significant dividend yield of 17.65%. The company has consistently paid dividends for 14 consecutive years, demonstrating commitment to shareholder returns despite market challenges.

In other recent news, Kohl’s has announced significant changes to its operations, including a reduction of its corporate workforce by approximately 10%. This decision follows the appointment of a new CEO, Ashley Buchanan, and is part of broader efficiency initiatives. Additionally, Kohl’s plans to close 27 underperforming stores and an e-commerce fulfillment center in San Bernardino, California, by April and May 2025, respectively. These closures represent about 2.3% of Kohl’s over 1,150 stores nationwide. The company estimates it will incur pre-tax charges ranging from $60 million to $80 million related to these actions, with the majority expected to be recorded in the fourth quarter of 2024. Despite these charges, Kohl’s reaffirms its financial and capital allocation outlook for 2024, excluding these expenses. Employees affected by the closures have been notified and will be offered severance packages or the opportunity to apply for other positions within the company. Kohl’s management believes that these moves will bolster the business’s long-term health and maintain its competitive position in the retail market.

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