Kohl's Corporation (NYSE: KSS) reported a not-so-impressive first quarter. It wasn't the worst I've ever seen, but I've seen better, certainly. Net sales were basically flat, and earnings per share dropped four pennies to $0.45.
Yes, that number did beat estimates by the proverbial penny, but the big problem I have with the quarter is the same-store sales performance. Kohl's saw a decline of 4.2% in comps. What does that mean? It means the retailer needs to do a lot of work in terms of attracting customers to its stores. Yes, the recession is a huge problem, and people are turned off by the idea of spending a lot of money on anything. Still, Kohl's must do a better job when it comes to getting people through its doors.
What does this mean for the stock? Well, the shares have been weak lately, but they have been strong over both the six-month and year-to-date frames. In fact, although I've been bearish on Kohl's, I will fully admit that the market has disagreed with me. Besides coming in ahead of Wall Street estimates, management did improve cash flow from operations in Q1. And the company has opened new locations. Maybe the market thinks that better times are ahead and that any bearish sentiment at this point is like looking in the rearview mirror. Maybe it's time to look forward.
Maybe. Yet, I still don't want to buy Kohl's. I suppose from a trading viewpoint you might some money off the shares. A long-term investment, however, is not something I'd want to engage with this company. I just think there are better ideas out there. Wal-Mart Stores, Inc. (NYSE: WMT) would be an example. Maybe even Target Corporation (NYSE: TGT).
For now, I'll stay on the sidelines. And, yeah, it may hurt to watch the shares rise from here (if that's what they intend to do). Doesn't matter. As investors and/or traders, we must go with what we're comfortable with. And I'm just not comfortable with Kohl's yet.
Disclosure: I don't own any company mentioned; positions can change without notice.
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