Kohl’s stock price crashed by more than 7% on Thursday, even after the retailer published strong quarterly results. The stock ended the day at $54.12, which is 16% below the year-to-date high of $64.85. The retailer has a market capitalization of over $8 billion.
Kohl’s earnings
Kohl’s is a well-known American retailer that mostly focuses on clothing and apparel for people of all ages. The company generates most of its sales from national brands and a small but growing private brands segment.
On Thursday, the company reported its first-quarter results that were better than analysts’ expectations. It made more than $3.89 billion in revenue, higher than the expected $3.48 billion. Its earnings per share came in at $1.05, which was better than the expected 4 cents.
It had impressive year-on-year revenue growth of 70%, putting it on par with many fast-growing technology companies.
The strong performance was attributed to the resurgence of in-store shopping as more states started to reopen. It was helped by a 14% year-on-year increase in online sales. The performance was also because of the government support measures.
In the first quarter, the American government dished more than $2.8 trillion in the stimulus. Most American adults received at least $2,000 checks. The government also boosted unemployment insurance benefits.
In a conference call with analysts, Michelle Gass, the company’s CEO, said that the company saw strong momentum in the first few weeks of the second quarter. Indeed, the company boosted its forward guidance. It expects to have an EPS of between $3.80 to $4.20, up from the previous range of $3.80 and $4.20.
Kohl’s stock price reaction
While Kohl’s had a strong quarter, its stock price performed badly. The shares dropped by as much as 10%, making it one of the worst performers. This is in line with what other retailers performed after reporting strong results. The stock prices of companies like Walmart, Lowe’s, and Home Depot all declined even after the strong results.
There are several reasons for this performance. First, investors are increasingly concerned about stocks that benefited during the lockdown. This includes companies like retailers and cloud providers like Zoom Video and Peloton. They are worried about whether these companies will be able to maintain their growth as the country reopens.
Also, there are concerns about the rising costs of retailers. To deal with the rising online demand, companies like Kohl’s invested heavily in logistics. While this was an appropriate measure, there are concerns that the costs will present a challenge for the company.
Kohl’s analyst’s expectations
Analysts are generally positive about Kohl’s stock price. For example, those at Deutsche Bank expect the stock to rise to $65. Similarly, those at JP Morgan and Jefferies see it rising to more than $70. However, these ratings came before the company’s earnings, meaning that analysts will upgrade them soon.
Kohl’s stock price analysis
The daily chart does not look good for Kohl’s stock price. The chart shows that the stock made a double-top pattern around $65. In technical analysis, this is usually a bearish signal.
The stock has also retested the 23.6% Fibonacci retracement level and the 100-day exponential moving average. Further, it has dropped below the neckline of the double-top pattern at $55. Therefore, the share price will likely continue falling as bears target the 38.2% and 200-day EMA at $44.
