Yahoo Finance Will Strategic Initiatives Drive Kohl's (KSS) Q1 Earnings? - Analyst Blog
Kohl’s Corporation KSS is set to report first quarter fiscal 2015 results before the opening bell on May 14. Last quarter, this specialty retailer posted a positive surprise of 1.67%. Let’s see how things are shaping up prior to the announcement.
Factors to Consider
Kohl’s is pinning its hopes on its new strategic initiative, “Greatness Agenda” to drive its comparable store sales in the soon-to-be reported quarter. Kohl’s started this initiative in the first quarter of 2014. It focuses on providing the right merchandise mix and tailoring products to every customer across every channel. This has helped the company to increase transactions per store and sales in fiscal fourth quarter 2014 and deliver positive comps after persistent declines for more than a year. We expect the trend to continue in the to-be reported quarter as well as Kohl’s is putting continuous efforts to improve its base business.
Further, the recovery in macro-economic environment and reducing fuel prices might also increase consumer spending power, which in turn will boost traffic at the stores. Estimates have also increased for first quarter 2015 over the past 30 days.
Keeping in view the optimism, Kohl’s has also provided a favorable outlook for fiscal 2015 compared with the last year.
However, the company expects higher expenses related to the roll out of the beauty initiatives to hamper margins in the upcoming quarter, as the company liquidates the old product to make way for the new one.
Earnings Whispers?
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 ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: ESP for Kohl’s is -5.26% as the Most Accurate Estimate of 54 cents is lower than the Zacks Consensus Estimate of 57 cents.
Zacks Rank #2 (Buy): Kohl’s carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings beat.
Also, 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 momentum.
Stocks to Consider
Stocks in the retail sector that have both a positive earnings ESP and a favorable Zacks Rank and are therefore worth considering include:
American Eagle Outfitters, Inc. AEO with an Earnings ESP of +9.09% and a Zacks Rank #2.
The Fresh Market, Inc. TFM with an Earnings ESP of +4.08% and a Zacks Rank #2.
Big Lots, Inc. BIG with an Earnings ESP of +1.70% and a Zacks Rank #3 (Hold).
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