Kohl’s genealogy has gotten ahead of itself, and it’s time to “step aside,” according to Citigroup, which displaced the company to neutral from buy on lingering fears of weak traffic.
“Mien of a major announcement of their partnerships expanding (which could help movement), Kohl’s still has a challenge to drive traffic on its own,” analyst Paul Lejuez bid in a note to clients Thursday. “Overall traffic (measured by transactions) was down in the opening quarter excluding the benefit of the shift in weeks. This was tolerable at $60 to $65. But with the array at about $76, we believe the risk reward is balanced.”
In premarket business Thursday after the report, the stock declined 1.5 percent, to $74.60.
In spite of the Wisconsin-based retailer posted same-store sales and earnings that run Wall Street’s expectations in late May, Chief Financial Officer Bruce Besanko revealed that the rank number of transactions was relatively flat over the quarter.
Lejuez did confess Kohl’s initiatives and partnerships in its efforts to retain customers, including its relationship with e-commerce Amazon Amazon. Such partnerships, he said, are likely responsible for a 23 percent turn for the better in the company’s shares over the past month.
“To be clear, this is not a noggin for the exits call,” Lejuez said. “The company is in the process of testing partnerships with grocery funds with its standard to small initiative. It also has the ongoing partnership with Amazon in 86 aggregates. Both of these initiatives seem promising and we believe it is possible the Amazon partnership could be expatiate oned.”
“But it also seems that the market may already be assuming the partnership becomes, leaving more risk to the downside if it does not.”
Citigroup’s new price object of $75 implies nearly 1 percent downside over the next year.