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Will Sluggish Comps Dampen Kohl's (KSS) Earnings in Q3?

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Kohl’s Corporation (KSS - Free Report) is set to report third-quarter fiscal 2016 results before the opening bell on Nov 11. Last quarter, this specialty retailer posted a positive surprise of 17.31%.

In fact, the company has posted an average positive surprise of 3.52% in the trailing four-quarters.

Let’s see how things are shaping up prior to the announcement.

KOHLS CORP Price, Consensus and EPS Surprise


KOHLS CORP Price, Consensus and EPS Surprise | KOHLS CORP Quote

Factors to Consider

Kohl’s has been struggling to boost its sluggish top line since the past many quarters. Sluggish comps and a difficult retail sales scenario are hurting sales at department stores. In fact, the company has slashed its earnings and sales guidance for fiscal 2016 due to weaker comps.

Despite Kohl’s continuous efforts to improve its base business, launch of new toy brands and preparation for the holiday season, its strategic initiative, ‘Greatness Agenda’ is showing weakness of late. This initiative, which commenced in the first quarter of fiscal 2014, was designed to increase transactions per store and sales. Though the plan has helped the company to deliver positive comps in all the four quarters of fiscal 2015 and fourth-quarter fiscal 2014, following persistent declines for more than a year, the quarterly growth rates have gradually decelerated. Moreover, comps declined in the first two quarters of fiscal 2016. Further, lower spending on apparel and accessories are hurting sales. Estimates for the third quarter of fiscal 2016 have also declined over the past 30 days.

Additionally, the company remains cautious about its fiscal 2016 results and plans to close 18 stores due to retail uncertainty as well as cautious spending by U.S. consumers.

 Earnings Whispers

Our proven model does not conclusively show that Kohl’s is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP for Kohl’s is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at 66 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Kohl’s carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Stocks in the broader retail sector carrying both a positive Earnings ESP and a favorable Zacks Rank, and therefore worth considering include:

Dave & Buster's Entertainment, Inc. (PLAY - Free Report) , with an Earnings ESP of +15.39% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Foot Locker Inc. (FL - Free Report) , with an Earnings ESP of +0.91% and a Zacks Rank #3.

Express Inc. (EXPR - Free Report) , with an Earnings ESP of +16.67% and a Zacks Rank #3.

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