TSC Ratings' Updates: Kohl's

Despite its growing revenue, the company underperformed as compared with the industry average of 7.1%. Since the same quarter one year prior, revenue has slightly increased by 3.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.

Its gross profit margin is 39.60%, which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 6.30% is above that of the industry average.

The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.15 is very weak and demonstrates a lack of ability to pay short-term obligations.

KSS' earnings per share declined by 7.2% in the most-recent quarter compared with the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, KSS has increased its bottom line by earning $3.39 vs. $3.33 in the prior year. For the next year, the market is expecting a contraction of 8.3% in earnings ($3.11 vs. $3.39).

The change in net income from the same quarter one year ago has exceeded that of the S&P 500 but is less than that of the multiline retail industry average. The net income has decreased by 12.3% when compared with the same quarter one year ago, dropping from $269.22 million to $236.02 million.

KSS had been rated a hold since Nov. 27, 2007.