Earnings Preview: Kohl's Corporation

Kohl's Corporation (KSS) is expected to report Q4 earnings Thursday with a conference call scheduled for 5:00 p.m. ET.

Guidance

Analysts are looking for a profit of $1.30 on revenue of $5.54B. The consensus range is $1.29 to $1.32 for EPS, and revenue of $5.47B to $5.94B, according to First Call. The company recently reported January same store sales down 8.3%, Q4 SSS down 4% and said it sees Q4 EPS at the low end of the $1.30 to $1.34 view. S&P analysts cut their Q4 and FY08 EPS estimates by 4c each, to $1.30 and $3.38.

Analyst Views

Kohl's expects to end the quarter with inventory below last year on a per-store basis, which S&P thinks reflects tight controls and reduces markdown risk this spring. Given a projected slowdown in consumer spending and perceived sales weakness in the home and women's apparel categories, S&P also lowered its FY09 EPS estimate by 35c to $3.60. Bernstein analysts raised the stock to Outperform from Market Perform, saying that now is an opportune time to invest in a "retail sector awash in cheap stocks." The broker cautioned that there could be challenging times ahead for the sector, with "very material risk" that a troubled labor market could lead to a more severe consumer spending slowdown.

Thomas Weisel thinks the company will report Q4 EPS at the low end of guidance, as the company notes that customers continue to purchase selectively. The brokerage expects the stock to be volatile as the positive sentiment battles the likely negative news flow; however, the firm views the headcount reductions, store closures and slower store opening plans as a positive. Despite lackluster January sales, Deutsche Bank analysts said the weak retail environment may even begin to improve in the near future.