By Sam Boughedda
UBS analyst Jay Sole reiterated a Sell rating and $32 price target on Kohl's (NYSE:KSS) shares Tuesday, telling investors in a note they "believe the market is underestimating the impact on KSS earnings from share loss to other retail channels like online pureplays and Off-Price."
Sole said this, plus the current macro headwinds, are likely to lead to earnings misses vs. the sell-side consensus and weakening sentiment.
A recent UBS survey has shown that Kohl’s is "struggling to add new customers and keep existing customers from migrating to other retailers," wrote Sole. "It's possible Kohl’s Sephora initiative can change this trend. However, we note Kohl’s has tried creative ways of adding new customers for the past few years, yet seemingly seen little benefit."
UBS survey data revealed three bearish trends, according to Sole: "Kohl’s customers’ NTM purchase intentions are the weakest they have been in 5 years and well below the Softlines industry average. Second, Kohl’s trial and loyalty rates, measures of its ability to attract new shoppers and keep existing customers, are deteriorating. Third, the age of the Kohl’s customer is increasing. This suggests to us Kohl's is having a hard time adding new customers with high lifetime values. The last 2 data points imply Kohl’s challenges could last beyond 2022."
"We model a -11% 5-yr. EPS CAGR and our FY23 EPS estimate is 24% below consensus," the analyst added.