KSS ain’t played out. If you’re in the ‘damn I missed it – I’ll revisit on a good comp’ camp, you might miss the move to $30. Then ‘the bottom’ at $25 on a perceived 10% dividend yield. Then No yield at $20…JCP all over again.
Three pillars of the call
- Credit: $1.70 in credit earnings. Starting to roll – regardless of the credit cycle. This part of the call needs to be right – today – given dividend. I think it is. People finally starting to focus on that – but it’s not in numbers yet. You get a better deal on those UnderArmour Ts using your Amazon Prime card in KSS than you do with your KSS/COF credit card. Yes, that’s real.
- Real Estate: $2.20 in overstated EPS due to the egregious lease structure. Sorry Kevin…you can’t structure property deals 3x the duration of similar box operators like BBY, BBBY, DKS, HD, MIK, etc…There’s no way out and the management team that’s left knows it.
- Sub-Prime: $1.25 in INCREMENTAL sub-prime earnings over this cycle. This is the most ‘REAL’ of any of these pillars, but even if you give the company credit for this, there’s $3.90 in earnings that is fake. And that’s on top of expectations that KSS will earn $3.50 this year and annuitize that forever.
If I’m right on these three pillars, then the ‘consensus short call is no-where in the ballpark of being ‘bearish enough’.;