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Kohl's Hits 52-Week Low on Concerns over Sluggish Top Line

Shares of Kohl's CorporationKSS dropped to a 52-week low of $47.56 on Sep 25, 2015, as the company continues to witness a general slowdown in consumer spending that is hurting sales at department stores. The closing price of this specialty departmental store retailer on Friday was $47.70.

Weak Consumer Spending

Kohl's has been witnessing sluggish sales of late due to lower consumer spending on apparel and accessories. The company noted that U.S. consumers have changed their spending habits. They prefer to spend more on restaurants, recreational services, health care and electronics rather than on general merchandise, apparel and furnishings. This has significantly impacted Kohl's sales.

In the recently reported second quarter fiscal 2015 results, Kohl's delivered worse-than-expected earnings and revenues. Earnings of $1.07 per share declined 5% from the prior-year due to lower margins. Net sales increased only 0.6% from the year-ago level. Comps growth was also marginal in the second quarter and lower than the preceding quarter.

Selling price per unit increased, while units per transaction decreased as customers purchased fewer items in response to the higher prices. Transactions decreased in the second quarter of 2015 due to delayed back-to-school shopping and the shift of sales in tax-free states from July to August. U.S. states offer a three-day sales tax holiday on back-to-school purchases. The tax holiday has shifted to August from July in most states this year. Kohl's largely caters to low- to middle-income customers for whom tax benefits are important for discretionary spending.

Expenses are also rising as Kohl's is incurring higher store expenses associated with the rollout of beauty initiatives and services like Buy Online, and Pick Up In Store to all. The company is planning a modest increase on trend on the remainder of the businesses for the fall season.

Though we remain encouraged with Kohl's solid brand portfolio, its strategic initiative, "Greatness Agenda", strong e-commerce business and impressive dividend yields over the long term, the weak results have raised concerns over the near term.

Moreover, the company now expects earnings at the low end of its previously guided range of $4.40 to $4.60 per share. Kohl's also remains cautious on its 2015 same-store sales and earnings guidance.

Kohl's has a Zacks Rank #4 (Sell). Better-ranked companies in the retail sector include The Kroger Co. KR , Citi Trends, Inc. CTRN and Ingles Market, Inc. IMKTA . All of them hold a Zacks Rank #2 (Buy).

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KROGER CO (KR): Free Stock Analysis Report

KOHLS CORP (KSS): Free Stock Analysis Report

CITI TRENDS INC (CTRN): Free Stock Analysis Report

INGLES MARKET A (IMKTA): Free Stock Analysis Report

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


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

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