Kohl's Shares Slip After Jefferies Downgrade, But Cramer Says Retail Worth Another Look

Jefferies analyst Randal Konik sees little improvement at Kohl's, but Jim Cramer wonders if "down-and-out" retailers are worth another look.
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Kohl's Corporation KSS shares were indicated lower in pre-market trading Tuesday after analysts at Jefferies cut their rating and price target for the mall-focused retailer 

Jefferies analyst Randal Konik lowered his price target by $7, to $65 per share, and trimmed his rating on the stock to "hold" from "buy", citing the prospect for disappointing comparable store sales and declining profit margins. Konik also noted that the retailer's attempts to diversify from mall-based sales, via partnerships with Amazon  (AMZN) - Get Report and Planet Fitness  (PLNT) - Get Report haven't translated into improved revenues or investment returns.

Kohl's shares were marked 1.36% lower in pre-market trading to indicate an opening bell price of $49.38 each, a move that would leave the stock with a six month gain of just 2.3%.

Kohl's slashed its full-year profit guidance after a weaker-than-expected third quarter, and now sees fiscal 2019 earnings of between $4.75 and $4.95 per share, down from its prior estimate of $5.15 to $5.40 per share.

Jefferies' outlook contrasts sharply with that of JPMorgan's Matthew Boss, whom TheStreet's founder, Jim Cramer, calls "the acknowledged dean of the retail group."

"According to Boss, Kohl's same-store sales could grow by as much as 1.5%, compared to Wall Street forecasts of 0.4%,"Cramer told his Mad Money audience last night on CNBC. In other words, he believes that Kohl's could meet or beat Wall Street's earnings estimates, something it hasn't done in ages given its recent dismal performance."

JPMorgan's Boss sees fourth quarter earnings for Kohl's in the region of $2.05 per share, around 7 cents ahead of the Street consensus forecast thanks in part to a strong Black Friday performance lead by non-apparel categories and help from its returns partnership with Amazon. 

"If you don't know Boss, he does a ton of fieldwork to find out how retailers are doing," Cramer wrote yesterday. "His work is coming up with some pretty shocking results. He's saying that his work shows that a number of store chains could have better than expected earnings, including some that will be shockingly better."

Beating Street earnings estimates "would be a shock in-and-of itself," Cramer added. "But given Matthew Boss' record, I think you'd be crazy to bet against him."