Behind Kohl's Q1 Success: Strategic Priorities And Management Changes, Says Analyst

Telsey Advisory Group analyst Dana Telsey reiterated a Market Perform rating on the shares of Kohl’s Corporation KSS with a price target of $24.
KSS reported first-quarter EPS of $0.13 versus $0.11 in the prior year period, coming in well ahead of the consensus.
The analyst noted earnings upside was driven by better-than-expected results across the board, with stronger sales growth and leverage on both the gross margin and SG&A all contributing to the first quarter beat.
The 1Q23 operating margin expanded 50 basis points to 2.7%, exceeding the market’s expectation of down 140 basis points to 0.8%.
The analyst noted that the nearly 6% inventory decrease follows last quarter’s 4% increase, which was preceded by three consecutive quarters of significant double-digit inventory increases against mid-to-high-single digit topline declines.
Despite the solid start to FY23, KSS reiterated its annual outlook across the board, commented the analyst.
With a new management team in place, the 1Q results are an encouraging sign that the company can continue to execute on its four strategic priorities to boost sales and profit, added the analyst.
While the analyst sees competitive advantages to the KSS model, the macro environment coupled with strategic transitions clouds visibility to near-term trends.
Price Action: KSS shares are trading higher by 7.6% at $20.75 on the last check Wednesday.
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