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Bear of the Day

Headquartered in Menomonee Falls, WI, Kohl’s Corp (KSS - Free Report) operates about 1,100 stores across 49 states and an e-commerce site. Falling estimates sent the stock back to a Zacks Rank #5 (Strong Sell).

Weak Guidance Reflects Rising Challenges

The retailer reported adjusted earnings of $1.44 per share for Q4, beating the Zacks Consensus Estimate of $1.32. Earnings were however down 9% year-over-year. Revenues were also in-line with the estimates, but down 2.8% year-over-year.

“Sales results were weak for the quarter in total, driven by declines in brick and mortar traffic, and offset somewhat by strength in online demand,” said the CEO.

The management expects earnings of $3.50 to $3.80 per share for fiscal 2017.

Falling Estimates

Analysts have slashed their estimates for the company after weak guidance.  Zacks Consensus Estimates for the current and next fiscal year have fallen to $3.60 per share and $3.66 per share from $3.80 and $3.92 respectively, before the report.

 

 

 

The Bottom Line

In addition to disappointing mall traffic, the retail space is going through a shift toward online shopping. With tightening labor markets, wage pressure has also started hurting retailers. It remains to be seen whether retailers like Kohl’s will be able to reorganize their operations and improve their profitability going forward. Further, the industry “Retail - Regional Department Stores” is currently ranked 253 out of 265 Zacks industries (bottom 5%), suggesting potential underperformance in the short-to-medium term.

There is no Zacks Rank #1 or #2 stock in the industry. It would be better for investors to stay away from this stock and the industry in view of rising challenges.

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