Kohl’s Share Price Forecast November 2021 – Time to Buy KSS?

Shares of the department store chain Kohl’s (NYSE: KSS) are in the red today, after closing at $57.01 as of November 19^th (19:59 EST). Kohl’s reported an adjusted EPS which is more than double that of Q3 2019’s last quarter. The share is now trading for just 8 times the full-year EPS guidance. Investors have plenty of reasons for optimism, such as new merchandise initiatives and aggressive share buybacks.

Kohl’s – Technical Analysis

The financial statement from Kohl’s indicates a market cap of $8.582 billion with assets worth $15.506 billion. Revenue for 2020 was at $15.96 billion with a profit margin of -1.02% compared to $19.97 billion in 2019.

Moving averages for Kohl’s such as Exponential Moving Average (20)(55.77), Simple Moving Average (20)(55.12),  Exponential Moving Average (30)(54.55),  Simple Moving Average (30)(52.27) and Exponential Moving Average (50)(53.56) are indicating a buy action. Oscillators such as Relative Strength Index (14)(55.00),  Stochastic %K (14, 3, 3)(73.75), Commodity Channel Index (20)(31.83), Average Directional Index (14)(33.06) and Awesome Oscillator (7.06) are neutral.

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Recent Developments

Kohl’s has lagged behind many of its peers on revenue growth this year while continuing a streak of impressive margin expansion. The company’s strong third-quarter margin performance was rewarded by investors initially, as the shares were up by more than 10% on Thursday. However, on Friday, the shares fell 9% which canceled out nearly all of those gains. Many analysts think that this made Kohl’s an absolute steal for long-term investors.

Kohl’s second-quarter results delivered a mixed bag, as revenue barely increased compared to the same period two years ago while it reported record earnings per share (EPS) of $2.48. The company posted its highest second-quarter operating margin in a decade, bolstered by exceptionally strong gross margin and tight expense control. This continued in the third quarter as well as net sales rose 15.5% year over year to $4.37 billion. But this is actually only 0.2% up from Q3 2019. Lower credit card revenue which is excluded from net sales actually resulted in a decreased total revenue during the same period mentioned above.

Supply chain challenges affected sales for the second consecutive quarter, with Kohl’s ending up with inventory down 25% from two years earlier. On top of that, port delays and other supply chain constraints have resulted in a higher-than-normal proportion of that inventory being in transit and not available for sale. By cutting back on discounts, Kohl’s capitalized on the combination of strong demand and tight inventory and achieved a gross margin of 39.9% which is an increase from 36.3% in 2019.

Should You Buy KSS Shares?

KSS shares are currently trading 8 times Kohl’s projected 2021 adjusted EPS and generated $1 billion of free cash flow in fiscal 2020 and $1.3 billion in the first nine months of fiscal 2021. Kohl’s has also focused on its share buyback program. Kohl’s spent $255 million on buybacks in the second quarter and $506 million last quarter after repurchasing just $46 million of shares. It ended last quarter with nearly $1.9 billion of cash despite its aggressive buyback activity. It now plans to repurchase another $500 million of stock in Q4.

Kohl’s profitability was boosted by a combination of strong consumer demand and an unusually tame promotional environment and well-positioned to grow its earnings further in the years ahead. The amount of sales they need to achieve is expected to be driven by women’s apparel. The company continues to enhance its brand portfolio by adding the likes of Calvin Klein, Tommy Hilfiger, and Eddie Bauer. KSS shares could easily reach $10 within a few years if it can capitalize on these tailwinds to accelerate its sales growth while maintaining its profit margin near current levels.

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