What happened
Shares of Kohl's (KSS 2.46%) were moving higher today, though there was no direct news out on the department store stock. Instead, investors seemed to be reacting to a better-than-expected earnings report by Macy's (M 0.40%) and an insider buying the stock.
As of 11:02 a.m. ET, shares were up 5.3%.
NYSE: KSS
Key Data Points
So what
Macy's, the country's biggest department store chain, topped earnings estimates in its second-quarter report, with a profit of a $1 per share against estimates of $0.85. It also beat revenue expectations, though comparable sales fell 1.5% in the quarter, and it slashed its full-year guidance as it sees consumer discretionary spending deteriorating in the second half of the year.
However, those results were enough to push the stock up 6.5%, and that carried the department store sector, including Nordstrom and Dillard's, higher as well.
Kohl's already reported second-quarter earnings, but the bump from Macy's update seems to underscore how cheap the sector is. Macy's trades at price-to-earnings ratio of less than 5 based on this year's earnings, and Kohl's is valued at a P/E of 10 based on this year's forecast, even after a weak second quarter led it to cut its guidance.
Separately, a filing last night showed that Peter Boneparth, a member of Kohl's board of directors, had purchased $750,000 in the stock. Insider buying is generally perceived as a bullish signal, especially after a steep sell-off like the one Kohl's has undergone over the last few months.
Now what
Kohl's stock was trading around $60 for much of the year as investors had expected a buyout in that range for the department store chain. The company earlier this year rejected an offer for $64 a share, however, with the deteriorating retail climate, Kohl's pulled plans for a sale and the stock crashed, now trading around $30 a share.
The Macy's report and the insider purchase seem to be giving investors some hope, but Kohl's financial performance needs to improve before the stock can make a full-fledged turnaround.
