Kohl’s Corporation operates as an omnichannel retailer in the United States. Headquartered in Menomonee Falls, Wisconsin, the department chain offers branded apparel, footwear, and accessories, in addition to beauty and home products through its stores and website.
The company provides its products under recognized brand names such as Croft & Barrow, Sonoma Goods for Life, SO, Food Network, LC Lauren Conrad, Nine West, and Simply Vera Vera Wang. Despite a presence of growth opportunities, Kohl’s continues to bear the brunt of a difficult macroeconomic backdrop and challenging retail landscape.
The stock was recently downgraded by analysts at Morgan Stanley, who stated that profitability expansion “will be harder to come by” in 2025. Significant pressure is being put on sales growth acceleration as Kohl’s faces heightened competition from major retailers and e-commerce giants. But as we’ll see, the consensus trend for both earnings estimates and revenues shows a clear negative tilt.
Kohl’s KSS, a Zacks Rank #5 (Strong Sell) stock, is a component of the Zacks Retail – Regional Department Stores industry group, which currently ranks in the bottom 23% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has over the past year:
Image Source: Zacks Investment Research
Stocks in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when they’re part of a lagging industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
KSS shares have been underperforming over the past year while the general market returned to new heights. The stock is hitting a series of lower lows and represents a compelling short opportunity as we head deeper into the new year.
The struggling retailer recently announced plans to close its San Bernardino, California-based e-commerce fulfillment center and 27 underperforming stores across more than a dozen states in 2025. Former CEO Tom Kingsbury stepped down earlier this month as the department store chain has had trouble adjusting to shifting consumer behavior.
Kohl’s has fallen short of earnings estimates in two of the past three quarters. Back in November, the retailer reported third-quarter earnings of $0.20 per share, missing the Zacks Consensus Estimate by -25.93%. Weak sales in the apparel and footwear segments caused management to lower its full-year outlook.
The company has posted a trailing four-quarter average earnings miss of -165.8%. Consistently falling short of earnings estimates is a recipe for underperformance, and Kohl’s is no exception.
Looking into its fiscal fourth quarter, the company has been on the receiving end of negative earnings estimate revisions lately. Analysts covering KSS stock have slashed Q4 EPS estimates by a whopping -33.63% in the past 60 days. The Zacks Consensus Estimate is now $0.75 per share, reflecting negative growth of -55.1% relative to the year-ago period.
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Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
As illustrated below, KSS stock is in a sustained downtrend. Notice how the stock has made a series of lower lows, widely underperforming the major indices. Also note that shares are trading below a downward-sloping 50-day (blue line) and 200-day (red line) moving average – another good sign for the bears.
Image Source: StockCharts
KSS stock has experienced what is known as a “death cross,” whereby the stock’s 50-day moving average crosses below its 200-day moving average. The stock would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions. Shares have fallen more than 40% over the past year alone.
A deteriorating fundamental and technical backdrop show that this stock is not set to make its way to new highs anytime soon. The fact that KSS stock is included in one of the worst-performing industry groups adds yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of Kohl’s until the situation shows major signs of improvement.
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