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Why Has Kohl’s Stock Price Surged 23% in 2018?

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Apr. 6 2018, Published 3:10 p.m. ET

Stock price up 23%

Department store retailer Kohl’s (KSS) has surged 23.4% on a YTD (year-to-date) basis as of April 5, 2018. A robust performance over the holiday season and an improved outlook have been the driving factors of this rise.

Holiday season sales benefited Kohl’s due to improved consumer sentiments and lower unemployment levels. Most retailers were able to drive higher sales, which subsequently boosted their stock price movements YTD. Macy’s has risen 22.8%, while JCPenney (JCP) has risen 6.6% YTD as of April 5, 2018. Nordstrom (JWN) has also risen 5.7% on a YTD basis. In comparison, the S&P 500 Index has fallen 0.4% on a YTD basis as of April 5.

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Going forward, 2018 is expected to be a good year for the US retail sector, according to Kiplinger. Retail sales (excluding gasoline and autos) are likely to rise 4.7% compared to the 4.1% growth they witnessed in 2017. E-commerce sales are expected to be up 15%, and store sales are expected to be up 3% in 2018.

E-commerce expansion

The expansion of e-commerce has disrupted the retail sector. The growing threat from online retailers—especially Amazon (AMZN)—and escalating costs continue to provide headwinds for traditional retailers such as Kohl’s. E-commerce’s expansion has resulted in lower footfalls at stores, and many retailers have been compelled to shut stores down.

To retain market share, many traditional retailers, including Kohl’s, are emphasizing the development of their digital (especially mobile) and omnichannel capabilities, tightening their inventory management, and exercising strong expense discipline. Kohl’s has also struck a deal with Amazon to boost its growth prospects.

Series overview

In this series, we’ll discuss Kohl’s growth strategies with a special emphasis on its recent deal with Amazon. We’ll also take a quick look at its recent quarterly performance and assess it from a valuation perspective to see what analysts recommend for it going forward.

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