News

August 25, 2009
KOHL'S: BACK UP THE TRUCK

This is probably you're last chance to snap-up some shares of Kohl's at a reasonable P/E.

Hence, I'm Reiterating my Buy rating for Kohl's Corp. (NYSE: KSS), first recommended on April 28, 2009 at a price of $43.82. If you bought Kohl's then, you're up about 20%.

Simply, Kohl's has the right business model at the right time. Kohl's is a moderate-price retailer that's held its own amid the recession, and will now benefit from a wider customer spectrum as the economic expansion starts. The positives: fast-growing status, market share gains, high operating margin, and decent new store openings, combined with the aforementioned increased traffic. The new era's frugal consumers are shunning the overpriced, higher-end retailers, especially for apparel, housewares, and certain accessories, and flocking to Kohl's.

However, with a P/E of 17, KSS isn't as cheap as it was in April, so this is probably your last chance to position yourself in the stock and earn an outsized gain. The First Call FY2009/FY2010 EPS estimates for KSS are $2.80 to $3.18.

Stock Analysis: Kohl's is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in KSS now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your KSS position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $28.