It seems the market has turned negative on Kohl's
If I were thinking short-term, it doesn't look like Kohl's turned in such a bad quarter. Gross, operating, and net margins were all better than a year ago, and diluted earnings per share were up a nice 20%. Given the stock's trailing P/E of around 20, it's not a bargain, but the company turned in a solid performance.
There is the problem of no operating cash flow and, in turn, no free cash flow, but that's primarily due to the addition of new stores and the requisite inventory. As an investor I'd rather see more of a balance between cash flow management and expansion, but with rapid-expansion retail concepts, cash flow is often elusive. It all comes down to whether you believe in the company's long-term concept.
Switching gears, the most positive part of the Kohl's press release is the company's decision to adopt Statement of Financial Accounting Standards No.123R (hereafter referred to SFAS 123R for simplicity). While sounding tremendously boring, Kohl's decision to adopt SFAS 123R is a positive for investors, because it means the company has decided to recognize the expense of stock options on its income statement. The company would have had to do this soon anyway, but I'm happy to see any company adopt the standard in advance.
Still, as an investor I'm not that eager to pick up shares in Kohl's. I think the company is going to have a tough time competing over the long term. Kohl's seems to perform well, and none other than my mother professes to love shopping there. But I don't see that much of a difference between the pricing and offerings at Kohl's and those at Target
As a long-term investor, I'd have to lean toward the other three companies and Wal-Mart
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