Why Kohl’s shares plunged again on Friday

What happened

Few investors are bullish on retail stocks right now, but the bears are definitely coming for Kohls (NYSE: KSS). For the second time this week, on Friday, the company’s shares took a heavy hit in the market, ending the day down almost 13%. The stock was beaten by a series of analyst price target cuts following a lackluster quarterly earnings report.

So what

On Thursday, Kohl’s released a first-quarter earnings release that made almost no one happy. On a 5% year-over-year drop in comparable sales, the company’s revenue fell 4% to just under $3.72 billion. Non-GAAP net income (adjusted) was $14 million ($0.11), well down from the first quarter 2021 result of $165 million.

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On average, analysts tracking Kohl’s stock had expected slightly lower revenue of $3.69 billion, but believed the company would earn $0.72 per share in adjusted net income.

Nor was the veteran retail operator’s forecast for the year 2022 inspiring. The company is modeling net sales growth of 1% year-over-year for the period, with earnings per share of $6.45 to $6.85, significantly below the collective estimate of analysts $7.18.

Now what

Kohl’s is looking for a way out. Company CEO Michelle Gass said she would “continue to engage with multiple interested parties” and was in the process of arranging offers from entities interested in potentially acquiring it.

None of this inspires confidence in the stock. A series of investment banks lowered their price targets on stocks on Thursday and Friday. Among this crowd was Morgan Stanley, whose analyst Kimberly Greenberger cut hers to $38 per share from $42 previously. Greenberger maintains its underweight (ie sell) recommendation on the stock.

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Eric Volkman has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

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