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Understanding Kohl’s Valuation Compared to Peers

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12-month forward PE

As of December 12, Kohl’s (KSS) was trading at a 12-month forward PE (price-to-earnings) ratio of 13.5x. The company’s valuation multiple has risen 22.3% since its fiscal 3Q17 results were announced on November 9. The company upgraded its full-year fiscal 2017 earnings guidance following improvement in its sales in fiscal 3Q17.

Comparison with peers

As of December 12, Kohl’s department store peers Macy’s (M) and Nordstrom (JWN) were trading at 12-month forward PE ratios of 9.5x and 15.6x, respectively. Kohl’s and its peers are currently trading at a lower valuation multiple than the broader market represented by the S&P 500 Index. As of December 12, the S&P 500 Index was trading at a forward valuation multiple of 18.8x.

The 12-month forward PE is computed by dividing a company’s current stock price with its projected EPS (earnings per share) for the next four quarters. This forward valuation multiple is influenced by many factors including growth expectations.

Analysts’ expectations

For full-year fiscal 2017, which ends on February 3, 2018, analysts expect Kohl’s sales to fall by about 0.1% to about $18.7 billion. Excluding one-time items, the company’s adjusted EPS is expected to rise 0.5% to $3.78 in fiscal 2017.

Currently, analysts expect Kohl’s sales and adjusted EPS to fall 1.3% and 1.2%, respectively, in fiscal 2018. Rising competition from online retailers is negatively impacting the sales growth of department stores like Kohl’s as well as other traditional retailers.

We’ll take a closer look at Kohl’s sales in the next part of this series.

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