UBS maintains Sell rating and $4 target on Kohl’s stock

On Friday, UBS analyst Jay Sole reaffirmed a Sell rating on Kohl’s Corporation (NYSE:KSS) with a steady price target of $4.00, significantly below the current trading price of $8.48. Despite trading at attractive multiples with a P/E ratio of 7.44 and P/B of 0.25, Sole’s assessment followed Kohl’s first-quarter earnings report, which, according to the analyst, confirmed UBS’s perspective that the market is not fully recognizing the challenges Kohl’s faces. According to InvestingPro data, the stock has declined nearly 58% over the past year, while still maintaining a significant 6.22% dividend yield. Specifically, the report suggests Kohl’s is losing market share to other retail sectors, including Off-Price channels.

Kohl’s is currently executing a turnaround strategy, but UBS does not anticipate any significant progress until at least fiscal year 2026. The firm expects Kohl’s to encounter further downward adjustments to consensus earnings per share (EPS) predictions in the near term (NTM). These revisions are likely to stem from tariff-related expenses and heightened competition, which could lead to more aggressive promotional activities and, consequently, pressure on earnings. InvestingPro analysis reveals that while the company maintains a "Fair" overall financial health score, analysts anticipate a sales decline in the current year.

UBS’s outlook suggests that these factors will likely dampen investor sentiment and push Kohl’s shares closer to the firm’s price target. Sole’s commentary indicates a cautious stance on the retailer’s near-term prospects, emphasizing the impact of competitive dynamics and cost pressures on Kohl’s financial performance. InvestingPro subscribers have access to 12 additional ProTips and comprehensive analysis that could help navigate this volatile retail environment, including detailed insights into Kohl’s valuation metrics and future earnings potential.

Kohl’s stock is anticipated to face headwinds as it navigates through its early-stage turnaround efforts amid a retail landscape that is becoming increasingly competitive. With a beta of 1.64, the stock shows significant volatility compared to the broader market. UBS’s analysis points to a potential alignment of the stock price with its forecasted target, driven by the factors outlined by Sole. The report by UBS serves as a reminder of the challenges Kohl’s may encounter as it strives to reposition itself in the market. For deeper insights into Kohl’s financial health and future prospects, investors can access the comprehensive Pro Research Report available exclusively on InvestingPro.

In other recent news, Kohl’s Corporation reported its first-quarter earnings for 2025, showcasing a notable improvement in earnings per share (EPS). The company achieved an EPS of -$0.13, significantly surpassing the forecasted -$0.47, reflecting a $0.34 beat. Despite a 4.1% decline in net sales, Kohl’s managed to generate revenue of $3 billion, slightly above the expected $2.99 billion. The rollout of Sephora within Kohl’s stores contributed positively to sales, with net sales up by 6%. Additionally, the company successfully reduced its selling, general, and administrative expenses by 5.2%, aiding overall profitability.

Kohl’s is navigating a challenging retail environment, with ongoing strategic initiatives like the Sephora rollout and cost management efforts beginning to show positive results. The company has maintained its full-year guidance, expecting comparable sales to decline by 4% to 6% and an operating margin between 2.2% and 2.6%. In the realm of analyst feedback, the earnings call highlighted discussions on tariff mitigation strategies and plans for women’s apparel recovery, reflecting investor interest in operational efficiency and growth potential.

The company’s interim CEO, Michael Bender, emphasized the strategic shifts underway, while CFO Jill Timm highlighted the importance of thoughtful inventory management. As Kohl’s continues its transformation, the focus remains on proprietary brands and enhancing the omnichannel experience to drive growth. The company’s recent refinancing efforts provide ample liquidity to navigate macroeconomic uncertainties and invest in strategic initiatives.

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