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1. Company Snapshot

1.a. Company Description

Kohl's Corporation operates as a retail company in the United States.It offers branded apparel, footwear, accessories, beauty, and home products through its stores and website.The company provides its products primarily under the brand names of Apt.


9, Croft & Barrow, Jumping Beans, SO, and Sonoma Goods for Life, as well as Food Network, LC Lauren Conrad, Nine West, and Simply Vera Vera Wang.As of March 21, 2022, it operated approximately 1,100 Kohl's stores and a website www.Kohls.com.Kohl's Corporation was founded in 1988 and is headquartered in Menomonee Falls, Wisconsin.

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1.b. Last Insights on KSS

Kohl's Corporation's recent performance was driven by a surge in share price, with a 37.6% increase in the last session, fueled by high trading volume and retail investor enthusiasm. The company's shares have been gaining traction, with a 105% jump in premarket trading and a 87% opening gain, driven by frenzied options trading and surging short interest. This rally has been attributed to Kohl's becoming the latest meme stock, following in the footsteps of Opendoor Technologies.

1.c. Company Highlights

2. Kohl's Delivers Strong Q3 Performance Amidst Ongoing Transformation

Kohl's Corporation reported a net sales decline of 2.8% in Q3, with comparable sales down 1.7%. Despite the decline, the company saw an improvement in transactions, driven by a strong digital performance, with sales up 2% versus last year. The gross margin improved 51 basis points to 39.6% in Q3, driven by strong inventory management and product mix benefits. The company's adjusted diluted earnings per share came in at $0.1, beating estimates of -$0.19. SG&A expenses declined 2.1% to $1.3 billion in Q3, driven by lower spending in stores, marketing, and fulfillment.

Publication Date: Nov -26

📋 Highlights
  • Improved Digital Performance:: Digital sales increased 2% YoY, driving 500 bps improvement in Kohl's Card customer sales vs. Q2.
  • Proprietary Brand Momentum:: Positive comp sales in proprietary brands for the first time since 2022, with new launches in home and kids categories.
  • Gross Margin Expansion:: Q3 gross margin rose 51 bps to 39.6%, aided by inventory optimization and product mix improvements.
  • Cost Discipline:: SG&A expenses fell 2.1% to $1.3B in Q3, despite 1.7% comp decline, reflecting operational efficiencies.
  • Holiday Guidance:: Full-year net sales decline projected at 3.5–4%, with adjusted EPS guidance raised to $1.25–$1.45, up from $1.15–$1.35 in prior guidance.

Operational Highlights

The company's operational performance was driven by its focus on proprietary brands, with sales running a positive comp in the quarter. The company has made significant investments in its proprietary brands, including the launch of new brands in home and kids categories. The Sephora business continues to perform well, with Kohl's expressing confidence in its ability to drive growth through newness and innovation.

Guidance and Outlook

Kohl's expects net sales to decline 3.5% to 4%, comparable sales to decline 2.5% to 3%, and other revenue to decline 11% to 12% in the next quarter. The company expects gross margin expansion of 30 to 35 basis points and SG&A decline of 3.75% to 4%. The guidance implies a continued improvement in the company's operational performance, driven by its focus on proprietary brands and cost discipline.

Valuation

With a P/E Ratio of 12.87 and an EV/EBITDA of 3.88, Kohl's appears to be reasonably valued compared to its peers. The company's ROE of 3.03% and ROIC of 4.07% indicate a moderate return on equity and invested capital. The Dividend Yield of 3.9% is attractive, given the company's commitment to paying off its debt and returning value to shareholders.

Debt and Cash Flow

Kohl's has a Net Debt / EBITDA ratio of 1.87, indicating a manageable debt burden. The company expects to pay off its $700 million revolver by the end of the year, which will further improve its financial flexibility. The Free Cash Flow Yield of 44.87% is attractive, given the company's ability to generate cash from its operations.

3. NewsRoom

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1 Meme Stock to Avoid Like the Plague

Dec -03

Source: fool.com

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Surging Earnings Estimates Signal Upside for Kohl's (KSS) Stock

Dec -02

Source: zacks.com

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Best Momentum Stocks to Buy for Dec.2

Dec -02

Source: zacks.com

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Best Value Stocks to Buy for Dec. 2

Dec -02

Source: zacks.com

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Ensign Peak Advisors Inc Decreases Holdings in Kohl’s Corporation $KSS

Dec -01

Source: defenseworld.net

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First Look: CME outage, Black Friday shifts, AI job impact

Nov -28

Source: gurufocus.com

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Terrain kicks off 6,800-metre RC drill campaign at Lightning and Wildflower prospects

Nov -28

Source: proactiveinvestors.com

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Small Cap Watch: Terrain Minerals, Asian Battery Metals, Altech Batteries, Aurum Resources

Nov -28

Source: proactiveinvestors.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.82%)

6. Segments

Women's

Expected Growth: 4.83%

Kohl's Women's segment growth of 4.83% is driven by increasing demand for athleisure wear, successful marketing campaigns targeting younger demographics, and strategic partnerships with popular brands like Nike and Under Armour. Additionally, Kohl's focus on plus-size and petite offerings has expanded its customer base, contributing to the segment's growth.

Men's

Expected Growth: 4.83%

Kohl's men's segment growth of 4.83% is driven by strategic partnerships with popular brands like Nike and Adidas, effective marketing campaigns targeting younger demographics, and an improved e-commerce platform. Additionally, the company's focus on private labels, such as FLX and Croft, has contributed to increased sales and customer loyalty.

Accessories (including Sephora)

Expected Growth: 4.83%

Kohl's Accessories, including Sephora, achieved 4.83% growth driven by strategic partnerships, expanded product offerings, and enhanced in-store experiences. Sephora's strong brand reputation and loyalty program contributed to increased foot traffic and sales. Additionally, Kohl's effective inventory management and targeted marketing efforts further boosted segment performance.

Home

Expected Growth: 4.83%

Kohl's Home segment growth of 4.83% is driven by increasing consumer spending on home decor and furnishings, fueled by rising homeownership rates and a strong housing market. Additionally, Kohl's strategic partnerships with popular home brands, such as Scott Living and The Rock, have expanded its product offerings and attracted new customers.

Children's

Expected Growth: 4.83%

Kohl's Children's segment growth of 4.83% is driven by strategic partnerships with popular brands like Nike and Carter's, effective marketing campaigns targeting millennial parents, and an improved online shopping experience. Additionally, the company's focus on offering trendy and affordable clothing options has resonated with parents, contributing to the segment's growth.

Footwear

Expected Growth: 4.73%

Kohl's footwear segment growth of 4.73% is driven by increasing demand for athleisure wear, successful partnerships with popular brands like Nike and Adidas, effective marketing strategies, and a strong e-commerce platform. Additionally, Kohl's focus on providing a seamless omnichannel experience and its efforts to revamp store layouts to prioritize footwear have contributed to the segment's growth.

7. Detailed Products

Clothing

Kohl's offers a wide range of clothing for men, women, and kids, including casual wear, formal wear, and activewear from popular brands like Nike, Adidas, and more.

Shoes

Kohl's sells a vast selection of shoes for men, women, and kids, including boots, sneakers, sandals, and dress shoes from brands like Vans, Converse, and more.

Bed and Bath

Kohl's offers a variety of bed and bath products, including bedding, towels, and kitchen essentials from brands like KitchenAid and more.

Home Decor

Kohl's sells a range of home decor items, including furniture, rugs, curtains, and decorative accessories from brands like Sonoma and more.

Electronics

Kohl's offers a selection of electronics, including TVs, soundbars, headphones, and gaming consoles from brands like Sony and more.

Toys and Games

Kohl's sells a variety of toys and games for kids, including action figures, dolls, puzzles, and board games from brands like Lego and more.

Beauty and Fragrances

Kohl's offers a range of beauty and fragrance products, including skincare, makeup, and perfumes from brands like Estee Lauder and more.

Jewelry

Kohl's sells a variety of jewelry pieces, including necklaces, earrings, rings, and watches from brands like Sterling Silver and more.

8. Kohl's Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Kohl's Corporation faces moderate threat from substitutes, as customers have various alternatives for shopping, including online retailers, department stores, and specialty stores.

Bargaining Power Of Customers

Kohl's Corporation faces high bargaining power from customers, as they have many options for shopping and can easily switch to competitors if they are not satisfied with prices or products.

Bargaining Power Of Suppliers

Kohl's Corporation has a low bargaining power of suppliers, as it is a large retailer with significant purchasing power, allowing it to negotiate favorable terms with suppliers.

Threat Of New Entrants

Kohl's Corporation faces a low threat of new entrants, as entering the retail market requires significant capital investment and establishing a strong brand presence, which can be a barrier to entry.

Intensity Of Rivalry

Kohl's Corporation operates in a highly competitive retail industry, with intense rivalry among established players, which can lead to pricing pressures and advertising wars.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 32.97%
Debt Cost 5.49%
Equity Weight 67.03%
Equity Cost 14.12%
WACC 11.28%
Leverage 49.19%

11. Quality Control: Kohl's Corporation passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Growth: 6.9

Quality: 7.1

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A-Score: 5.8/10

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Yield: 7.0

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Quality: 5.0

Yield: 3.0

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Kohls

A-Score: 4.6/10

Value: 9.0

Growth: 2.4

Quality: 3.2

Yield: 9.0

Momentum: 2.5

Volatility: 1.3

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

23.05$

Current Price

23.05$

Potential

-0.00%

Expected Cash-Flows