Retail

Earnings Previews: Alibaba, Kohl's, Macy's

Kohl’s

Department store operator Kohl’s Corp. (NYSE: KSS) has posted a 12-month share price increase of about 142%. But that’s about 8% below its peak in mid-May. The shares have added more than 26% since the end of October, helped along by the big beat that rival Dillard’s posted last week. The store also has faced pressure to spin off the e-commerce business that now accounts for around a third of its revenue and to use the money raised to reduce debt, increase buybacks and invest more in e-commerce growth.

Of 17 analysts covering Kohl’s stock, seven rate the shares at Buy and eight have a Hold rating. The other two have Sell and Strong Sell ratings. At a price of around $58.20, the upside potential based on a median price target of $64 is 10%. At the high price target of $82, the upside potential is about 41%.

For the retailer’s third quarter of fiscal 2022, analysts are looking for revenue of $4.28 billion, up 1.3% sequentially and 13.2% year over year. Adjusted EPS are forecast at $0.70, down 72% sequentially but up from $0.01 in the year-ago quarter. For the full fiscal year ending in January, analysts currently forecast EPS of $6.14, compared to a year-ago loss of $1.21, on sales of $18.56 billion, up 23.5%.

Kohl’s share price to earnings multiple for the 2022 fiscal year is 9.5. For the 2023 fiscal year, the multiple to estimated EPS of $5.90 is 9.9, and for 2024, it is 9.2 times estimated EPS of $8.90. The stock’s 52-week range is $25.38 to $64.80. Kohl’s pays an annual dividend of $1.00 (yield of 1.74%). Total shareholder return for the past year was 125%.

Macy’s

Shares of Macy’s Inc. (NYSE: M) have added about 330% over the past 12 months. Like Kohl’s, Macy’s is faced with activist investors demanding that the company spin off its e-commerce business and use the proceeds to buy back more shares and distribute more to shareholders.

While both retailers did see surges in their e-commerce business during the pandemic lockdowns, now that brick-and-mortar stores are reopening, business in physical retail is picking up again. The question Macy’s has to answer is where will future growth come from, e-commerce or more physical stores?

Only three of 17 analysts rate Macy’s stock as a Buy, and none has a Strong Buy rating on the stock. Another eight rate the shares at Hold, and six have Sell or Strong Sell ratings. At a price of around $31.50, the stock trades well above its median price target of $16.15. Based on a high price target of $37, the potential upside on the shares is 17.5%.

Analysts are forecasting third-quarter fiscal 2022 revenue of $5.22 billion, down 7.6% sequentially but up about 31% year over year. Adjusted EPS are tabbed at $0.33, down 75% sequentially but up from a year-ago loss of $0.19 in the quarter. For the full fiscal year ending in January, analysts are currently looking for EPS of $3.91, compared to last year’s loss of $2.21 per share, on sales of $23.88 billion, up 37.7%.

Macy’s share price to earnings multiple for the 2022 fiscal year is 8.0. For the 2023 fiscal year, the multiple to estimated EPS of $3.36 is 9.3, and for 2024, it is 9.6 times estimated EPS of $3.26. The stock’s 52-week range is $7.74 to $31.96. Macy’s pays an annual dividend of $0.60 (yield of 1.97%). Total shareholder return for the past year was around 295%.

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