Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Kohl's Corp. Dropped Today

By Timothy Green – May 14, 2015 at 12:08PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Kohl's mixed earnings results weren't all that bad, but the stock may have gotten ahead of itself over the past year.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of department store operator Kohl's (KSS -1.75%) slumped on Thursday after the company reported mixed first-quarter earnings, falling short of analyst expectations for revenue. By noon, Kohl's stock had fallen by about 11.5%.

So what: Kohl's reported revenue of $4.12 billion, up 1.3% year-over-year, driven by 1.4% comparable-store sales growth. This fell short of the average analyst estimate for revenue by $70 million, and was modestly below the company's original expectations for the quarter, according to CEO Kevin Mansell.

Kohl's reported EPS of $0.63, up 5% year-over-year and eight cents better than what analysts were expecting. The earnings results were buoyed by a more balanced promotional environment compared to the same period last year, as well as strong expense control, according to Mansell.

Now what: Kohl's results weren't bad, but the stock was severely punished for missing sales estimates. The quarter was a vast improvement over the first quarter of 2014, when comparable-store sales fell by 3.4%, and Kohl's profitability was far better than what analysts expected.

The stock has run up quite a bit over the past year, rising about 33%, and the stock traded at about 17.5 times earnings before it tumbled today, so this extreme reaction may have been partially valuation-driven. Kohl's has struggled to grow over the past two years, and it has dramatically reduced its rate of opening new stores, so the stock may have gotten a bit ahead of itself.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Kohl's Stock Quote
$31.93 (-1.75%) $0.57

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.