This COF print is the most bearish KSS datapoint I’ve seen all year. (KSS = Best Idea Short, and COF = Best Idea Short for Financials).
COF provision for credit losses just changed on the margin – Bearish side -- by 15.7%. Came in at $1.99bn vs $1.72bn Consensus.
US card biz was the big problem.
Here’s the KSS Math:
- KSS is doing nearly $1.70 per share in credit income – on a base of $3.50 in EPS.
- Then there’s another $1.25ps in egregious lease accounting/structuring.
- Then another $1.00 in earnings hinged upon the a sub-prime customer KSS Credit has acquired since last cycle.
Do the math -- on a REAL bassis (ie that ould and should be realized), KSS earns nothing, has no cash flow, needs a LOT more leverage, and does not need equity value.
The KSS short has worked thus far, but I always want to be right for the right reasons -- for the BIG factors, not th enear term earning smiss one.not necessarily for the right reasons. That's the only think that bugs me more that being right on the research call and the stock going the wrong way.
Those BIG unfolding trends are still to come – starting with credit roll (should break by end of 2Q EPS) -- keeping in mind that the company jacked late fees in 4Q, which contributed to 4% growth in credit. That's a last reasort. Excluding this, growth was non-existant.
Then a dividend cut, then forced store closures, then de-levering the P&L/occupancy, then levering up the balance sheet, then Ch11 with no real estate optionality.
KSS = Best Idea Short.
