Heading into their Q1 results is morning, Kohl’s (KSS) was up 22% on the year, up 46% from its 52 week lows, and only down about 6% from the all time highs made in early April. The breakout of a 4 year consolidation early this year was nothing short of epic:
The stock’s breakout was partially the result of a redefined growth plan last year, mildly improving results, cheap valuation and investor perception that their mid range consumer would be the prime beneficiary of lower gas prices at the pump while the company would have little adverse affects from the surge in the dollar.
This morning the stock is trading down 10% on Q1 sales that were below expectations. The conference call is going on as I write, but the headlines seem to corroborate some of what we have seen from other retailers of late. January and February sales were adversely affected by bad weather, but comp store sales improved in April and May. That doesn’t exactly jive with yesterday’s report for April retail sales that marked a decline, with a modest revision higher to March.
Frankly, I find KSS uncompelling as a stock, even down 10%. And given the recent build up in positive sentiment over the last 6 months I would expect the stock to round-trip the breakout, possibly finding support at its 200 day moving average (yellow line below) which happens to correspond with the breakout:
Retail stocks as a group don’t act particularly well, with very few confirming the most recent high in the S&P500 from late April. As for their results, we have seen few so far in this earnings cycle that have beat, let alone meet expectations (GPS, RL, M & WFM all in the last week disappointing). In the coming week we get results and more importantly guidance from HD, LOW, TJX, TGT & WMT.
These results will paint us a fairly complete picture of the health of the U.S. consumer, and I suspect it is a tad less rosy than many would hope for if we are to extrapolate the most recent retail results.