In retail, it’s hard to ignore the fact that the trend has not been an investor’s friend. How else to explain the November reversals in Kohl’s (KSS), Macy’s (M), Dillard’s (DDS) and JC Penney (JCP), among others?
Reuters Consider: Turning the three months ending Oct. 31, Kohl’s had gained 7%, while Macy’s had dropped 4.6%, Dillard’s had fallen 2.9% and JC Penney had plunged a whopping 49% as investors fretted about its future.
But then Macy’s reported stellar earnings yesterday, and Kohl’s missed this morning, and JC Penney offered signs of hope and suddenly the laggards are winners. In November, Macy’s has gained 10%, Dillard’s is up 12% and JC Penney has risen 17%, while Kohl’s has dropped 4.7%.
Will Kohl’s stay down? Sterne Agee’s Charles Grom and team see reasons for optimism:
KSS saw a “dramatic” improvement in Oct. trends, which have continued into Nov.; (2) part of the 3Q SSS weakness (likely ~100 bps) was due to the re-platforming of its e-commerce site, which should impact SSS positively in coming quarters; (3) inventory levels are in good shape ($ per store were down 5% YOY on a calendar shift adjusted basis); (4) KSS is seeing "LSD" sale lifts from its new loyalty card program (now in 30% of stores) in test markets, including CA, which rolled out in Sept.; & (5) while still a year out, the Fall 2014 launches of Juicy Couture and Izod brands are important wins for KSS on the national brands front (assuming merchandise margin $ can be well managed).
Shares of Kohl’s have dropped 7.7% to $53.76 today at 1:41 a.m.
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