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Kohl’s Stock Fell 18.8% on News of Weak Fiscal 4Q15 Sales

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Kohl’s stock down on weak 4Q15 sales

Kohl’s (KSS) stock dropped by 18.8% on February 4, 2016, following a disappointing update provided by the company on its 4Q15 (ended January 30, 2016) sales and fiscal 2015 outlook.

The news of Kohl’s lower-than-expected 4Q15 sales figures impacted other retail and department stores stocks too. The stock prices of Macy’s (M), Nordstrom (JWN), JCPenney (JCP), and Dillard’s (DDS) declined by 2.1%, 6.1%, 4.8%, and 1.8%, respectively on February 4.

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Underperformance in 4Q15

Kohl’s reported total sales growth of 0.8% for 4Q15 and 1% for fiscal 2015 ended January 30, 2016. We’ll discuss the reasons behind the subdued sales numbers in the next part of this series. The company lowered its fiscal 2015 earnings guidance following its sales underperformance.

Excluding debt extinguishment losses recorded in prior quarters, Kohl’s now expects its fiscal 2015 diluted EPS (earnings per share) to come in the $3.95–$4.00 range. The company previously expected diluted EPS, excluding debt extinguishment charges, to come in at the low end of the $4.40–$4.60 range.

Aside from the lower-than-planned 4Q15 sales, the company also cited its lower-than-expected gross margin as a reason for downward revision of guidance. Kohl’s gross margin was adversely impacted by the origin and timing of the sales and higher markdowns on merchandise due to a competitive promotional environment.

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Stock at a 52-week low

As of February 4, 2016, Kohl’s (KSS) stock has declined by 16.2% to $41.52, since the start of the year. The company touched its 52-week low price of $40.95 on February 4. The Consumer Discretionary Select Sector SPDR ETF (XLY) and the S&P 500 Index have declined by 5.6% and 4.8%, respectively, since the start of 2016. Kohl’s constitutes about 0.5% of XLY. The company also makes up 1.3% of the SPDR S&P Retail ETF (XRT).

As of February 4, 14 of the 24 analysts covering Kohl’s have a “hold” recommendation for the stock, eight analysts have a “buy” recommendation, and two analysts gave a “sell” recommendation. Currently, the company’s 12-month price target is $50.30, which reflects a 21.1% upside compared to the current stock price.

The analysts’ recommendations and price target could be subject to further revision when Kohl’s provides more information on its fiscal 2015 earnings and next fiscal year’s outlook on February 25, 2016.

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