Kohl's Hopes Appear Dashed
Vincent Martin | Jul 07, 2022 09:40
This article was written exclusively for Investing.com
It seems incredibly easy to make the case for Kohl's Corporation (NYSE:KSS) stock at the moment. Relative to trailing twelve-month results, shares of the U.S. department store operator trade at just 4.3x earnings with a dividend yield of 7.3%.
And less than four months ago, the Menomonee Falls, Wisconsin based retailer was the subject of a bidding war. That was even after the company ended the bidding process. And retailers of all stripes have plunged from where they traded at the beginning of the year. TGT stock is down 37%. Macy's (NYSE:M) has lost almost one-third of its value. The market has rapidly adjusted to the 'new normal' for retail—which, unfortunately, may look a lot like the old normal.
And that gets to the core problem here. Before the pandemic, KSS stock went nowhere. During the 2010s, shares lost 5.6% of their value. The S&P 500 rallied 190%.
During that period, over and over investors believed that stocks like KSS were simply “too cheap.” With few exceptions, they were proven wrong. Maybe this time is different for Kohl's; maybe a sub-5x multiple to estimated earnings for this year indeed is too cheap.
But we've heard that story before. Given the pressures on the industry, and the end of the bidding process, as well as a stock market which is significantly lower, investors can probably do better elsewhere.
Disclaimer: As of this writing, Vince Martin has no positions in any securities mentioned.
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