Kohl’s (KSS) Stock Sinking as Retailers Deal With Disappointing Sales

Retail stocks such as Kohl's (KSS) are falling today as the sector is hit by weak U.S. sales for October.
By Amanda Schiavo ,

NEW YORK (TheStreet) -- Shares of Kohl's (KSS) - Get Report are down by 6.53% to $42.81 on Friday afternoon, as U.S. retailer stocks are being dragged down by the weaker than expected rise in U.S. sales for the month of October.

U.S. retail sales grew by 0.1% in October, missing the 0.3% increase economists had been expecting, Reuters reports.

Retail sales excluding automobiles, gasoline, building materials and food services were up by 0.2% last month versus a 0.1% rise in September.

"Even though we continue to expect personal spending to remain a key source of support for economic activity this quarter, this report does point to a very weak start to the quarter," Millan Mulraine, deputy chief economist at TD Securities told Reuters.

Additionally, retailer stocks are still feeling some pressure from Macy's (M) disappointing sales results. The department store said its third quarter profit dropped by 46% year over year. Sales fell by 5% from the year ago third quarter.

Kohl's is a specialty department store based in Menomonee Falls, WI.

The company reported a 1.2% rise in sales for the 2015 third quarter on Thursday to $4.43 billion, helped by strong demand during the back to school shopping period.

Separately, TheStreet Ratings team rates KOHL'S CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

We rate KOHL'S CORP (KSS) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.4%. Since the same quarter one year prior, revenues slightly increased by 0.6%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.89, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.29 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Multiline Retail industry. The net income has significantly decreased by 44.0% when compared to the same quarter one year ago, falling from $232.00 million to $130.00 million.
  • Net operating cash flow has significantly decreased to $251.00 million or 54.44% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: KSS

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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