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Kohl’s Valuation Compared to Its Peers

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12-month forward PE

As of September 26, 2017, Kohl’s (KSS) was trading at a 12-month forward PE (price-to-earnings) ratio of 12.4x. The company’s valuation multiple has risen 16.0% since the announcement of its fiscal 2Q17 results in August. Kohl’s beat analysts’ sales and earnings estimates for fiscal 2Q17. However, the company’s sales fell for the sixth quarter in fiscal 2Q17.

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Peers’ valuation

As of September 26, peers Macy’s (M), Nordstrom (JWN), and JCPenney (JCP) were trading at a 12-month forward PE ratio of 7.5x, 15.8x, and 10.1x, respectively. Nordstrom delivered better sales growth rates than Kohl’s and other department stores in 1H17. The growth was a result of strong online sales and the company’s off-price Rack business sales.

Kohl’s and its peers are trading at a lower valuation multiple than the S&P 500 Index—a forward PE ratio of 18.1x.

The 12-month forward PE ratio is influenced by many factors like growth expectations and the risk-return profile.

Growth expectations

Currently, analysts expect Kohl’s revenue to fall 0.6% to $18.6 billion in fiscal 2017. The company’s adjusted EPS is expected to remain essentially flat at $3.76 in fiscal 2017—compared to the previous year.

Kohl’s sales are under pressure due to the tough retail market and rising competition from Amazon (AMZN) and off-price retailers like TJX Companies. As we discussed in Part 2 of this series, the company is taking several initiatives to boost its sales.

In the next part, we’ll look at analysts’ recommendations for Kohl’s stock.

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