Kohl's Rebounds, Clears Buy Point Despite Weak Sales


Discount retailer Kohl's is in buying range after showing surprising strength following a mixed earnings report.

Kohl's ( KSS ) stock is still in the 5% buy zone from Wednesday's breakout past a 58.30 buy point. Volume was a little shy of the 40% jump that signals a healthy breakout.

The stock has advanced since Aug. 13, the day before Kohl's second-quarter earnings report. The firm said that its profit rose 9% from a year earlier to $1.13 a share, above forecasts.

Revenue slipped 1% to $4.24 billion, the fourth straight decline and below estimates.

Retailers have struggled to boost sales amid tepid wage growth, which has forced many consumers to trim spending.Macy's ( M ),Nordstrom ( JWN ) andDillard's ( DDS ) also reported weaker-than-expected quarterly sales.

Yet the Retail-Department Stores industry group was ranked No. 26 out of 197 as of Thursday's IBD.

On Wednesday, Credit Suisse said that department stores controlled inventories much better in Q2 than in Q1, with sales growing faster than inventories for the first time in three years, according to stock-information website theflyonthewall.com. Kohl's, Dillard's and Macy's decreased inventories.

On Thursday, Gilford Securities upgraded Kohl's to buy from neutral.

Menomonee Falls, Wis.-based Kohl's is expected to report full-year profit of $4.28 a share, up 6% from last year, followed by a 10% increase in 2015. Kohl's three-year earnings stability factor is 3 on a scale of 0 (most stable) to 99 (least stable).

The company began offering a dividend in 2011 and has increased the payout every year.

The latest increase came earlier this year, when Kohl's increased its dividend by 4 cents, or 11%, to 39 cents a share. The annual rate of $1.56 a share is good for a yield of 2.6% at the current share price, above the S&P 500 average of 1.9%. The dividend growth rate is a robust 15%.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: KSS , M , JWN , DDS

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