Kohl's May Blame Winter Weather for First-Quarter Earnings Slip

Sometimes, rough weather is the culprit.

Winter snow and ice will likely form part of the discussion on Tuesday, May 22, when department-store owner Kohl's Corp. (KSS)  reports first-quarter earnings.

Credit Suisse analyst Michael Binetti downgraded the stock from outperform to neutral in a note on May 11, saying that "with cold weather damaging industry traffic, we see first quarter risk (with KSS more weather sensitive versus peers)."

Most of Kohl's stores are in the Northeast and the Great Lakes, which were hit hard this year by several winter storms.

Kohl's is coming off a standout fourth quarter, when it posted earnings of $1.99 a share versus the Wall Street expectations of $1.77 and exceeded revenue forecasts with total sales of $6.78 billion versus $6.74 billion. 

Credit Suisse also lowered its first-quarter earnings per share expectations slightly to 50 cents a share versus 51 cents on single-store sales. Binetti noted though he believes in Kohl's, the chain is unlikely to offset its projected first-quarter miss during 2018. The bank also lowered its price target to $64 to $72. Kohl's shares rose $1.35, or 2.1%, to $65.02 in Monday trading on the New York Stock Exchange as of about 12:30 p.m.

On the upside, Kohl's may be ready to reap rewards from the bankruptcy of Bon-Ton, a $2.6 billion revenue chain now liquidating its 260 stores, for three reasons — proximity, similarity to its customer base and Kohl's actions aimed at capturing Bon-Ton's customers. Some 76% of Bon-Ton's stores are within five miles of a Kohl's, whereas the numbers for Sears Holding Corp. (SHLD) , J.C. Penney Co.   (JCP) and Macy's Inc. (M) are 69%, 58% and 24% respectively. 

In addition, Kohl's new partnerships in the last year have made it a one-stop-shopping locale in a sense: some of its stores are an exchange point for Amazon.com. Inc. (AMZN) purchases and have an Aldi grocery store within. That second part isn't a stretch for Kohl's, which opened as a supermarket in 1946, then sold off its grocery arm to the Great Atlantic & Pacific Tea Company, or A&P, in 1983.

Even now, on the eve of Kohl's first-quarter report, its second quarter looks brighter, wrote J.P. Morgan's Matthew R. Boss in a May 14 note. "We see a pent-up seasonal apparel sales opportunity (about 50% recapture opportunity in our view)." 

Amazon.com Inc. and Kohl's Corp. are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN or (KSS) ? Learn more now.

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