) is set to report second quarter fiscal 2013 results on Aug 15.
Last quarter, it posted a 15.8% positive surprise. Let's see how
things are shaping up for this announcement.
Factors to Consider this Quarter
Kohl's has been struggling with high inventory levels since
the last few quarters. The inability to attract consumers in the
last holiday season further increased its inventory. The slow
inventory turnover along with improper pricing and ineffective
marketing strategies have gradually slowed down the company's
sales. Moreover, clearing the stock at the cost of its margin is
also hurting the company's profitability.
However, in order to reduce inventory levels and drive sales,
the company aggressively promoted its brands and invested in
marketing and e-commerce initiatives throughout fiscal 2012.
Kohl's also introduced a new merchandise team in fiscal 2012,
which aims to increase assortments and expand the number of
private and exclusive brands.
These initiatives bore fruits in the first quarter and we
believe that continued product innovation and initiatives taken
up by the company will benefit in the upcoming quarters as well.
Kohl's tight expense management and lower share count owing to
share buybacks are also expected to boost earnings in the second
Our proven model does not conclusively show that Kohl's is
likely to beat earnings this quarter. That is because a stock
needs to have both a positive earnings expected surprise
prediction (ESP) (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank #1, #2 or #3 for this to happen. That is not
the case here as shown below.
Negative Zacks ESP:
The Most Accurate estimate stands at $1.02 while the Zacks
Consensus Estimate is higher at $1.03. That is a difference of
Zacks Rank #3 (Hold):
Kohl's Zacks Rank #3 (Hold) lowers the predictive power of ESP
because the Zacks Rank #3 when combined with a negative ESP makes
surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and #5 (Sell
rated stocks) going into the earnings announcement, especially
when the company is seeing negative estimate revisions
Other Stocks to Consider
Here are some other companies in the retail sector that can be
considered as our model shows that they have the right
combination of elements to post an earnings beat this
Ross Stores Inc
), Earnings ESP of +1.08% and Zacks Rank #2 (Buy).
Family Dollar Stores Inc
), Earnings ESP of +1.19% and Zacks Rank #3 (Hold).
), Earnings ESP of +10.0% and Zacks Rank #3 (Hold).
FAMILY DOLLAR (FDO): Free Stock Analysis
KOHLS CORP (KSS): Free Stock Analysis Report
ROSS STORES (ROST): Free Stock Analysis
SUPERVALU INC (SVU): Free Stock Analysis
To read this article on Zacks.com click here.