More declines are likely in store for Kohl’s ( NYSE: KSS ) shares as the battered retailer continues to fall after rejecting multiple offers above $60 per share, according to Credit Suisse.
In a note to clients on Tuesday, the bank lowered its second quarter EPS estimates to $1.54 from $2.05 and reduced same store sales projections by 8% as the bank now models significant net sales declines.
“Our take: Negative,” equity analyst Michael Binetti wrote in a terse assessment of Friday’s update . “Importantly, KSS did not take 2022 guidance down, leaving a further negative catalyst ahead.”
He added that there is “a high likelihood that the incremental deleverage could be worse” than the bank initially expected with an increasingly likelihood of further downbeat guidance updates.
“While KSS reaffirmed its buyback plans, we see potential for KSS to cut 2022 EPS again, and think the company may need to announce a cost-cutting program soon,” he advised clients.
However, Binetti stopped short of extrapolating Kohl’s ( KSS ) woes to the broader softlines sector.
“We don’t view the announcement as a clear read-thru to a deteriorating industry backdrop …more so that KSS over-guided and missed its plan,” he concluded. “Bottom line, in our view, we don’t think KSS misguiding necessarily means the rest of Softlines Retail earnings estimates need to be significantly revised lower, today.”
Read more on Kohl’s ( KSS ) decision to reject the latest offer from Franchise Group .
For further details see:
Kohl’s estimates cut at Credit Suisse due to ‘negative catalysts ahead’