UBS reiterates Sell rating on Kohl’s stock with $4 target amid weak sales

Investing.com - UBS has reiterated its Sell rating and $4.00 price target on Kohl’s (NYSE:KSS) ahead of the retailer’s second-quarter earnings report. The stock, currently trading at $13.93, shows signs of being overvalued according to InvestingPro analysis, despite trading at a modest P/E ratio of 12.5.

UBS cited channel checks suggesting that Kohl’s sales trends in the second quarter were worse than expected, prompting the firm to lower its Q2 earnings per share forecast by 5 cents to $0.30, which aligns with the consensus estimate.

Despite elevated reciprocal tariff rates that have taken effect since Kohl’s reported first-quarter results, UBS expects the company to maintain its fiscal year 2025 guidance range of $0.10 to $0.60 per share.

UBS believes the current guidance range is wide enough to accommodate potential impacts from higher tariff rates, a view the firm thinks is shared by the broader market, suggesting the Q2 report may not significantly revise Street estimates or move the stock’s price-to-earnings ratio.

The options market is pricing in a potential 16% move in either direction around the earnings event, compared to Kohl’s historical average movement of 7.8% following quarterly results. This elevated volatility expectation is consistent with the stock’s beta of 1.75 and recent price action patterns identified by InvestingPro, which features 8 additional key insights about Kohl’s current financial position.

In other recent news, Kohl’s Corporation reported its first-quarter earnings for 2025, significantly surpassing expectations. The company achieved an earnings per share (EPS) of -$0.13, outperforming the forecasted -$0.47. This positive result was attributed to effective cost management and strategic initiatives, despite a decline in net sales. Meanwhile, UBS reiterated its Sell rating on Kohl’s stock, maintaining a price target of $4.00. UBS expressed concerns over Kohl’s competitive position, citing a loss of market share to off-price retailers and potential downward adjustments to earnings predictions. The firm highlighted challenges such as tariff-related expenses and heightened competition that could pressure earnings further. Additionally, Kohl’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on September 24, 2025. These developments provide investors with a mixed outlook on the company’s near-term performance.

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