Undervalued Kohl's (KSS) Could Ramp Higher in 2014 - Barrron's
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Mid-priced Retailer Kohl's (NYSE: KSS) is ticking higher early following a positive mention in Barron's over the weekend.
While shares are up 3.6 percent over the last three years (S&P 500 up 48 percent) and pundits cite inventory imbalances, constricted profit margins, and ho-hum merchandising as points that have hampered Kohl's performance, there might be some light at the end of the tunnel starting in 2014.
Barron's points to private-label programs, merchandise improvements, cost-cuts, and a revamped online business as drivers for growth at Kohl's, with some estimates thinking the stock could hit $60 next year. In addition, Kohl's has had a shareholder-friendly capital allocation program: buybacks have been $4.6 billion from 2010 though 2012, while the company also pays a dividend with an annual yield of 2.6 percent.
Shares are also undervalued, trading for just 11.6 times forward earnings. That's a discount to the retail industry and also historical P/E highs of over 30 times reached in the early 2000s.
Key factors going for Kohl's include the hiring of Michelle Gass from Starbucks as the company's chief commercial officer. Gass will not only focus on marketing, but the retailer's e-commerce business as well.
Store expansion will be minimal at 12 in 2013, down from 40 in 2011.
Kohl's is also working to attract more national brands by offering more attention in advertising and in-store placement.
While $90 isn't a long way from $55, the planned buybacks and dividend should give investors reason to take a second look. Shares are up over 0.4 percent Monday.
While shares are up 3.6 percent over the last three years (S&P 500 up 48 percent) and pundits cite inventory imbalances, constricted profit margins, and ho-hum merchandising as points that have hampered Kohl's performance, there might be some light at the end of the tunnel starting in 2014.
Barron's points to private-label programs, merchandise improvements, cost-cuts, and a revamped online business as drivers for growth at Kohl's, with some estimates thinking the stock could hit $60 next year. In addition, Kohl's has had a shareholder-friendly capital allocation program: buybacks have been $4.6 billion from 2010 though 2012, while the company also pays a dividend with an annual yield of 2.6 percent.
Shares are also undervalued, trading for just 11.6 times forward earnings. That's a discount to the retail industry and also historical P/E highs of over 30 times reached in the early 2000s.
Key factors going for Kohl's include the hiring of Michelle Gass from Starbucks as the company's chief commercial officer. Gass will not only focus on marketing, but the retailer's e-commerce business as well.
Store expansion will be minimal at 12 in 2013, down from 40 in 2011.
Kohl's is also working to attract more national brands by offering more attention in advertising and in-store placement.
While $90 isn't a long way from $55, the planned buybacks and dividend should give investors reason to take a second look. Shares are up over 0.4 percent Monday.
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