4 Reasons Why Gordon Haskett Is Downgrading Kohl's After Earnings

The outlook for Kohl's Corporation KSS seems particularly uncertain, and traffic trends could remain subdued well into 2021, according to Gordon Haskett.

The retailer reported a second-quarter adjusted earnings loss of 25 cents per share Tuesday, beating a Street estimate of an 83-cent-per-share loss. Sales of $3.41 billion beat a $3.09-billion estimate. 

The Kohl's Analyst: Chuck Grom downgraded Kohl's from Hold to Underperform and set a $14 price target. 

The Kohl's Takeaways: Although the Kohl’s management team is strong, elusive traffic trends could exert pressure on the bottom line in 2021, Grom said in a Tuesday downgrade note.

The analyst named four issues “that span both the near-term set-up as well as how Kohl’s comp recovery could manifest in 2021.”

• The back-to-school season is the biggest near-term worry for Kohl’s, with a survey indicating that around 35% students will not be attending classes in person this fall and parents will be shopping later this year.
• The weather outlook is unfavorable for the company, which has historically been highly weather-sensitive.
• The upcoming holiday season outlook remains bleak for apparel retailers, as a heightened promotional environment could persist through the rest of the year, consumers may continue to avoid shopping stores and the upcoming election could create some anxiety around the shopping period.
• The sales recovery in 2021 could be less robust than earlier expected.

KSS Price Action: Shares of Kohl’s were trading down 0.85% at $19.84 at the the time of publication.

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Photo courtesy of Kohl's.