Citi expects Kohl's EPS miss, but says negative sentiment will help earnings
Citi analysts maintained a Neutral rating and $20 per share price target on Kohl’s (NYSE:KSS) Thursday, stating they expect the company to miss second-quarter EPS estimates.
However, analysts told investors in a note that they expect the very negative sentiment will help the earnings.
«We are looking for an EPS miss vs consensus driven by weaker sales, while we expect better GM than consensus,» wrote analysts. They added that the firm's foot traffic data indicates a deceleration in traffic in the second quarter.
«We model a deceleration in sales from -3% in 1Q to -5% in 2Q (vs consensus of -3%). We believe mgmt will narrow the guidance range by lowering the high end based on challenging traffic trends, though we believe they will remain confident in their GM guidance (+280-330bps),» said analysts.
Furthermore, While Citi expects a miss in the quarter, short interest remains high, and Citi's crowding analysis indicates that «KSS is one of the most crowded shorts in our grp, reflecting very negative sentiment going into earnings.»
«As a result, we believe the set-up into the print skews more favorable. We believe mgmt commentary about upcoming initiatives will offset the negative of the 2Q miss,» the analysts concluded.
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