Kohl's is anticipated to suffer a continued decline in market share as a challenging consumer spending landscape takes its toll, potentially undermining sales growth and profit margins. UBS Securities articulated these concerns in a note released on Wednesday. The brokerage has significantly reduced its price target for the department store's stock from its previous levels to $5, maintaining a sell recommendation.
Analysts at UBS highlight macroeconomic pressures, such as persistent inflation and the tapering of stimulus-related effects, as key factors that will likely pose challenges to both revenue and margins. According to UBS, they forecast that weak margins will persist beyond 2025 as Kohl's continues to lose market share, leading to sluggish sales growth and a mounting difficulty in managing fixed costs. On Tuesday, Kohl's stock took a significant hit, plummeting 24% after the company joined the ranks of retailers providing a pessimistic outlook for 2025 amidst an environment of increasing macroeconomic uncertainty.
By late afternoon trading on Wednesday, Kohl's shares had further decreased by 4.8%. UBS analysts noted that Kohl's has likely lost approximately one-third of its market share between 2013 and 2024, primarily due to competition from off-price retailers, Amazon, and other brands. The analysts opine that broader trends, such as consumers' shift to online shopping and their heightened preference for value, are significant contributors to this market erosion, and they anticipate these trends will persist.
They also cautioned that attempts to lower prices may be counterproductive, as this might alienate some premium national brands. UBS expects the loss per share to expand to $0.60 in the first quarter, a rise from $0.24 in the same quarter a year ago, which contrasts with the FactSet consensus predicting a loss of $0.52.
They project a decline in sales of 6.7% year-over-year for the current quarter, projecting revenues of $2.98 billion, slightly above the FactSet consensus estimate of $2.97 billion. Moreover, UBS has revised its full-year earnings per share (EPS) estimate for 2025 down to $0.25, a stark reduction from the previous forecast of $1.25.
On Tuesday, Kohl's reported expectations for a decline in full-year net sales ranging from 5% to 7%, following a 7.2% drop in fiscal year 2024. Similarly, comparable sales, which fell by 6.5% last year, are projected to decrease between 4% and 6%. UBS also downgraded its EPS projections for the years 2026 and 2027. Price: 8.71, Change: -0.45, Percent Change: -4.86..