We’re adding Kohl's Corp. (KSS) to our Best Idea list as a short. We'll be hosting a call on Wednesday, September 24th at 11:00am EDT to review our thesis in depth (including some preliminary results of the department store consumer survey that we just completed).
We have not liked this name for a while, but we're adding to our Best idea list because we think the recent 180 degree turn in sentiment and subsequent strength in the stock is simply unwarranted. Are estimates in check for the next two quarters? Probably. But the big issues are a) substantial risk to the model in 2015, and b) the duration of a 'new normal' for KSS at a lower EPS level.
Specifically, while the Street is looking for 10% earnings growth next year, we're modeling a -10% decline in earnings for the year. We think that 2014 will mark the last time for at least 4-5 years -- barring a parabolic acceleration in the U.S. economy -- that KSS will earn anything starting with a $4. That's not good when the Street is over $5 two years out. Its operational misses should crimp its ability to buy back stock and financially engineer the P&L.
We'll have a very detailed slide deck analyzing key levers of the P&L and balance sheet, and will also delve into key e-commerce and real estate considerations.
Call Details
Toll Free Number:
Direct Dial Number:
Conference Code: 765136#
Materials: CLICK HERE
