Jefferies Thinks Kohl's To Be Helped By Favorable Product Mix

Jefferies & Co. is out with a research report on retailers, and thinks that Kohl's KSS is likely to be helped by its favorable product mix. It has a Buy rating on shares. In a note to clients, Jefferies & Co. writes, "Among the companies in our universe reporting comp store sales, Kohl's has the most significant seasonal product mix and therefore the one most likely helped by consistent warm weather in June. Management guided to a 2-4% increase and consensus sits at 3.2%. We are forecasting a 3-5% comp store sales increase in June. After experiencing softer sales earlier in the year, the company built a bit more promotion into its Q2 plan. We believe traffic improved in June as customers responded well to promotional events. Shares continue to be discounted on softer sales earlier in the year and inflation concerns. Company tests of price elasticity indicate a neutral impact, units are expected to offset price increases, with some brands exhibiting better price elasticity. Clearly the risk is that consumer behavior changes when the entire store is up double digits on price. Management has seen less sensitivity than expected in the kid's business, so we are now anticipating price increases more in line with cost of goods increases (total company AUR around $12.50 and the Kids AUR about $7). While we continue to like the name in the intermediate term, we think shares will likely trade in the low to mid 50s shorter term." Shares of KSS are down 16 cents in early Tuesday trading to $51.63.