Kohl’s fiscal year 2023 will end near the last week of January

Kohl’s Stock Performance

Kohl’s stock (NYSE: KSS), a department store catering to middle-income customers, currently trades at $26 per share. This marks a significant drop of around 60% from its pre-inflation shock high of $64 on May 17, 2021.

Amid the pandemic, consumer buying habits have shifted away from department stores, posing challenges for Kohl’s. Even with an e-commerce platform, the company faces formidable online competition. In the first nine months of FY 2023, Kohl’s sales dropped 5% to $11.5 billion, while earnings plunged by over 40% year-over-year to $1.18. Moreover, the retailer grapples with negative cash flow and long-term debt of $1.6 billion.

Despite these struggles, Kohl’s stock is trading at remarkable discounts, heralding potential gains. The company is in the early stages of many strategic efforts, expected to contribute incrementally in FY 2024 and beyond.

Historical Stock Performance and Market Trends

Over the last three years, KSS stock has fared poorly, declining 35% from early January 2021 to its current levels. Comparatively, it underperformed the S&P 500, posting returns of 21% in 2021, -49% in 2022, and 14% in 2023. In sharp contrast, the S&P 500 saw returns of 27% in 2021, -19% in 2022, and 24% in 2023.

It’s crucial to acknowledge the challenging market environment and the difficulty of consistently outperforming the S&P 500. Even heavyweight stocks like AMZN, TSLA, and HD, as well as tech giants such as GOOG, MSFT, and AAPL, have faced this hurdle. In contrast, the Trefis High Quality (HQ) Portfolio, comprising 30 stocks, has outperformed the S&P 500 each year for the past three years, reflecting the efficacy of a diversified approach.

What Could the Future Hold for Kohl’s Stock?

Kohl’s stock will need to recuperate about 148% to reclaim its pre-inflation shock level. Our valuation of KSS is approximately $25 per share, which is 4% lower than the current market price. We’ve conducted an in-depth analysis of KSS’ upside post-inflation shock and compared it to the company’s performance during the turbulent 2022 market conditions and the 2008 recession.

Context: Inflation and Market Fluctuations

The market’s recent inflation shock is reminiscent of the 2007/2008 financial crisis. While stimulus measures boosted demand in 2020 and 2021, disruptions in the supply chain led to inflation rates crossing 4% in April 2021. The situation worsened in early 2022, with inflation peaking at 9%, triggering a series of aggressive interest rate hikes by the Fed. However, there has been some respite in the second half of 2023 as the Fed holds interest rates steady.

Comparing KSS performance during the 2007-08 crisis, the stock witnessed a decline of nearly 39% from its pre-crisis peak to the market bottom and then rebounded by around 53% over the following year. Conversely, the S&P 500 experienced a 51% decline and staged a 48% recovery over a similar period.

Company Fundamentals and Conclusion

Despite challenges stemming from the pandemic and inflation, KSS saw its sales rebound from $16 billion in 2020 to $18.1 billion in 2022. However, earnings per share fluctuated from $4.39 in 2019 to -$0.15 in 2022.

Looking ahead, with the Federal Reserve’s measures to curb inflation boosting market sentiment, KSS stock holds the potential for significant gains once fears of a recession subside.

Comparative Returns and Market Insights

According to the recent market data:

So as you contemplate your next investment move, keep in mind that strong gains may potentially be in store for Kohl’s stock.

Don’t forget to explore KSS Peers and discover how Kohl’s stock compares against its peers on critical metrics across industries.

Finally, consider investing with Trefis Market-Beating Portfolios to gain invaluable insights.