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Kohl's Corp KSS

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Morningstar’s Analysis

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No-Moat Kohl’s Strong Second Quarter Justifies Its Strategic Efforts; Shares Fully Valued

David Swartz Equity Analyst

Analyst Note

| David Swartz |

No-moat Kohl’s blew by our 2021 second-quarter sales and profitability estimates as store traffic improved, pricing was strong, and cost containment was solid. The company’s 12.8% operating margin came in far above our 7.1% forecast and was its best in any second quarter since 2011. For comparison, Kohl’s operating margin in (prepandemic) 2019’s second quarter was below 9%. Given the second-quarter result and outlook for the rest of 2021, we expect to raise our per share fair value estimate of $47 by a high-single-digit percentage. However, we view Kohl’s shares as fully valued after the mid-single-digit percentage increase on the results.

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Company Profile

Business Description

Kohl’s operates 1,162 department stores in 49 states that sell moderately priced private-label and national brand clothing, shoes, accessories, cosmetics, and home furnishings. Most of these stores are in strip centers. Kohl’s also operates a large digital sales business. Women’s apparel is Kohl’s largest category, having generated 25% of its 2020 sales. The retailer, headquartered in Menomonee Falls, Wisconsin, opened its first department store in 1962.

N56 W17000 Ridgewood Drive
Menomonee Falls, WI, 53051
T +1 262 703-7000
Sector Consumer Cyclical
Industry Department Stores
Most Recent Earnings Jul 31, 2021
Fiscal Year End Jan 29, 2022
Stock Type Cyclical
Employees 110,000