The retail space is littered with misplaced ideals, impossible ideas, and problematic business models. Hence it is best avoided, given the U.S.'s pronounced recession. But an opportunity or two still exists for investors who can tolerate high risk, and Kohl's (NYSE: KSS) is one.
Kohl's is a moderate-price retailer that's holding its own amid the recession. In general, analysts like Kohl's fast-growing status, large operating margin, and the chain's ability to widen its customer base. Kohl's is seeing some increased foot traffic from the new era's frugal consumers who are shunning the overpriced, higher-end retailers, especially for apparel, housewares, and certain accessories.
Other positives: Kohl's plans to open 55 stores in F2010 (opening any stores in this economic environment is considered a sign of strength) and it will remodel about 50 locations. Given downsizing by competitor chains (and perhaps the cessation of operations for a few chains), Kohl's should grab more market share in key cities. The First Call F20210/F2011 EPS estimates for KSS are $2.38 / $2.73.
To be sure, the p/e of 16 is not low for a retailer, given the macroeconomic headwinds, but for those who can tolerate risk, KSS is worth a try, but do note the tight Sell/Stop Loss.
Stock Analysis: Kohl's is a high-risk stock. Don't Buy KSS if you can not tolerate high risk. If you can, consider buying a 25% position in KSS now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your KSS position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $28.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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