Earlier this week, Kohl's (NYSE: KSS) issued its August sales report. Kohl's hasn't been on my list of potential buys, but like I said back in May, the stock has been technically strong. I wanted to check back in with the retailer to see how things are going.
According to the press release, total net sales increased 4.8%. We don't care too much about total sales, though. We want to know what the same-store sales say about the company. That stat is way more vital for this sector. Unfortunately, comps were up a pitiful 0.2% last month, and they declined by 2.7% for the year-to-date period.
I really don't like declining same-store sales (who does, right?). But I love the price action in the company. I'm sure many of you out there do, too. You want an excuse to get in.
Well, my colleague Joseph Lazzaro does offer encouragement. Check out his recent piece where he suggests a sound buying strategy for getting in on Kohl's while minimizing the risk.
But let me go back to that word risk. I personally think you might still be able to make some money from investing in Kohl's, but you've got to be willing to hold for a while in case things get ugly. This is where the risk comes in. It's a timing issue, for the most part.
Think about it. We've basically hit the fall selling season. The major indexes did pretty well throughout the summer. So did many stocks, including Kohl's. Will a lot of shareholders be interested in booking profits at this point? But beyond timing, there is the economy to consider. Oh, you didn't forget about that, did you?
How will the consumer react this winter? Will Christmas be good or not? And let's not forget the strong competition from Wal-Mart (NYSE: WMT) and Target (NYSE: TGT). I would feel more comfortable about Kohl's as an investment idea if the comps were better.
Still, as my fellow writer said in his article, you don't have to buy all at once. You can dollar-cost-average if things do become crazy again and volatility to the downside emerges as a trend. And another colleague, Mark Fightmaster, offered some useful thoughts on the technical aspects of the Kohl's situation when he covered the stock earlier this month. Shares actually went beyond the resistance level of $53 that he identified in his article. On Friday, they closed at $54.58.
Taking all this into account, my gut is telling me that any investor who might have a decent profit in Kohl's right now may want to book the gains ahead of the Christmas season. Just to be on the safe side. If the stock pulls back, then it looks like a buy. The technical and valuation angles are attractive. It's just those darn comps. Come on, management, bring them up and complete the story!
Disclosure: I don't own any company mentioned; positions can change without notice.
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