Kohl’s Corp. (KSS) is structurally advantaged relative to peers in the retail industry, locating their off-mall retail stores conveniently and with a business model which allows stores to be serviced efficiencly from a distribution and merchandising standpoint, translating into attractive return in capital, says Michael M. Meyer, Partner & Analyst/Portfolio Manager at Cooke & Bieler.
“Kohl’s, by virtue of their structural advantages and also a management team that has been unusually stable and consistently good on the execution side, has an enviable track record of generating strong earnings growth relatively consistently,” Meyer said. “We think the stock right now is beaten down, and really, we don’t see a fundamental reason for that.”
Meyer says KSS outperformed relative to peers during the challenging environment of 2008 and 2009. And now that consumer spending is on the rise and stores like Macy’s (M) are recovering, Meyer says there there is an underappreciation for the dependability of a company like Kohl’s.
“Right now, with the stock trading at roughly 10 times earnings and 10 times free cash, or 10% free cash flow yield, it’s very attractive from a valuation standpoint. So we look at it and see that return on capital, and we think it is going to continue to offer attractive returns to shareholders, and there’s the potential upside kicker to valuation expansion at this point as well,” Meyer said.
Fiesta Restaurant Group (FRGI) Accelerates Pollo Tropical’s Double-Digit Growth, Outperforming Restaurant Peers
March 18, 2013
T. Rowe Price Group (TROW) Investment Products Outperform Peers’
April 08, 2013
Schlumberger Limited (SLB) Multiservice Business Remains Stronger Than Oil & Gas Peers’
January 06, 2015
Recommended Reading – Google’s CFO Search: Why’d it take so long?
June 27, 2008
Recommended Reading – Why ‘say on pay’ won’t work, Fortune
November 16, 2009
