On November 14 before the market opens, Kohl's (NYSE:KSS) will report its earnings for its third quarter of 2013. Leading up to the earnings release, analysts expect the company to report earnings per share of $0.86 on revenue of $4.55 billion. If predictions prove accurate, this would mark a 5.5% decline from the $0.91 in earnings per share that the company reported in the third quarter of 2012. However, it would result in a 1.3% increase from the $4.49 billion in revenue the company reported in the same period.
Based on the market's estimates, it's clear that not too much is expected of this nearly $12.5 billion retailer. However, this raises the question of whether there is money to be made by buying the company as a long-term investment as a contrarian opportunity. In order to determine if this is likely the case, I analyzed Kohl's and compared it to other big retailers Nordstrom (NYSE:JWN), Macy's (NYSE:M), and J.C. Penney Company (NYSE:JCP).
Growth is the name of the game... or at least it should be!
Despite analysts expecting lower earnings for the quarter on just slightly higher revenue, it should come as no surprise to the Foolish investor that Kohl's has had a remarkable run these past few years. For instance, over the past five years, revenue for the company has grown at a rate of about 4.1% per annum or, in aggregate, 17.6% from $16.4 billion in 2009 to $19.3 billion as of the end of its 2013 fiscal year.
Likewise, its net income has clocked in some amazing growth, rising by 31.9% from $885 million in 2009 to $1.17 billion in 2012. However, due to an increase in its cost of goods sold, it saw its net income fall by 15.5% to $986 million in its 2013 fiscal year.
In comparison, Macy's saw its revenue rise by only 11.2% from $24.9 billion in 2009 to $27.7 billion in 2013. However, while Macy's failed to improve its revenue at the same clip that Kohl's did, Macy's has more than made up for this in terms of net income. In 2009 the company reported a net loss of $4.8 billion due to an impairment charge of nearly $5.8 billion.
However, even excluding its 2009 year, you arrive at the conclusion that it has been able to increase its net income by 305.8% from the $329 million it reported in 2010 to the nearly $1.34 billion it was able to achieve in its 2013 fiscal year.
Though Macy's bottom line improvement is certainly the best of the bunch, it's Nordstrom that takes the crown when it comes to top line growth. Over the same time horizon as the other companies profiled herein, Nordstrom has been able to increase its revenue by 41.7% from the nearly $8.6 billion it saw in 2009 to the $12.1 billion it reported in its last annual report.
Just as should be expected of a fast-growing business, it also saw attractive net income growth of 83.3% from the $401 million it made in 2009 to the $735 million it made during its 2013 fiscal year, enabling it to place second in this category behind Macy's.
Finally, we arrive at J.C. Penney. For the past few years, investors have been troubled by the company's declining prospects as a series of management decisions resulted in revenue declining by 29.8% from the nearly $18.5 billion it earned in 2009 to the roughly $13 billion it brought in during 2012.
On top of this revenue decline, the company saw its net income fall from $572 million to negative $985 million over the same time horizon. In effect, this poor performance has made J.C. Penney the worst, by far, of this group.
Based on this data presented above, it appears as though Kohl's sits on the lower side of the pack. It looks more attractive than J.C. Penney, but it isn't as good as either Macy's or Nordstrom. On the other hand, if we look at the net profit margin of each company, we can see that, at a four-year average of 5.8%, Kohl's is second only to Nordstrom (though Macy's has been making good ground as the company whose margins are improving the most of the four).
While it is very possible that margins may decline, as Kohl's lower earnings forecast but higher revenue relative to last year suggests, the investor who prefers a solid business may find Kohl's or Nordstrom attractive. However, for those of a more speculative nature, J.C. Penney or Macy's will likely be the more appealing prospects.
Daniel Jones has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.