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Kohl’s Growth Prospects in 2019

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Jan. 17 2019, Updated 3:09 p.m. ET

Future expectations

For the fourth quarter of fiscal 2018, Wall Street analysts expect Kohl’s (KSS) sales to fall 2.7% YoY (year-over-year) to $6.59 billion. For fiscal 2018, analysts forecast sales growth of 1.1% YoY to $19.30 billion. However, for fiscal 2019, analysts expect a sales increase of 1.1% to $19.51 billion on a YoY basis. Kohl’s management hasn’t provided a sales outlook.

On January 10, Kohl’s reported 1.2% YoY growth in sales for this holiday period (which includes data for the nine weeks ended January 5, 2019). In contrast, in 2017, Kohl’s holiday period (November and December) sales were up 6.9% YoY.

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As a result, the stock tanked 4.8% on January 10. The holiday season is crucial for retailers, which generate the majority of their revenue in the period. Dismal holiday sales data from Macy’s (M), Nordstrom, and JC Penney (JCP) has also hurt investors’ sentiment. So far in January, Kohl’s stock has gained 1.7%.

Growth drivers

Kohl’s has been collaborating with several other brands to improve its merchandise on display, which could contribute to the top line. Kohl’s will begin selling Nine West handbags, clothing, and shoes at its stores beginning in mid-2019. The company now has Lego brands and FAO Schwarz in its toy portfolio and has partnered with digital women’s apparel brand PopSugar.

Both its digital business and its stores’ performance remains strong. The women’s apparel business will likely benefit from the improved merchandise assortment and a deliberate reduction in choices for customers. For fiscal 2018, Kohl’s has forecast the comps to increase 1%–2%.

Kohl’s has partnered with Amazon to develop stores within stores and had ~30 locations. For Kohl’s, the motive behind the partnership is to drive traffic to stores. Kohl’s collects Amazon returns at over 100 stores. It ships the returns to Amazon for free.

Expectations for peers

For fiscal 2018, analysts forecast Macy’s (M) top-line growth at 0.7% YoY to $25.0 billion. For Nordstrom’s (JWN) fiscal 2018, analysts project top-line growth of 3.4% YoY to $16.0 billion.

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