Option Trade 
Kohl's Corporation (NYSE:KSS) Puts
Wednesday, May 10, 2017

** OPTION TRADE: Buy the KSS JUNE 16 2017 37.500 PUT at approximately $1.45. Place a pre-determined sell at $2.90.

Note: No protective stop losses added -- but if you wish to do so make it $0.60.

Also Note: This is a recommendation and individual members can use their own discretion as to when to enter or exit!

by Ian Harvey   

Kohl's Corporation (NYSE:KSS), a family-oriented department stores that sell apparel, footwear and accessories for women, men and children; soft home products, such as sheets and pillows, and housewares, is set to report first quarter of fiscal 2017 results on May 11 before the market opens.

It is doubtful that the departmental store will be able to maintain its positive earnings surprise streak in the to-be-reported quarter, even though it outpaced the Consensus Estimate in three of the trailing four quarters, with an average positive surprise of 7.98%.

Kohl's forms part of the Retail-Wholesale sector. Per the latest Earnings Preview, it was noted that the above mentioned sector's earnings growth looks disappointing. Total earnings for the sector are estimated to fall 2.2% on margin decline of 0.2%, while revenues are projected to improve 3.3%.

Looking at the earnings estimate revisions to get a clear picture of what analysts are thinking about the company right before the earnings release – shows that the current Consensus Estimate for the quarter under review has declined marginally over the past 30 days and is currently pegged at 28 cents, down 9.7% from 31 cents delivered in the year-ago quarter. Analysts expect revenues of $3.9 billion, down 1.9% from the prior-year period.

Kohl's Co.’s 50 day moving average price is $39.19 and its 200-day moving average price is $44.21. The company has a market capitalization of $6.75 billion, a P/E ratio of 12.59 and a beta of 1.12. Kohl's Co. has a one year low of $33.87 and a one year high of $59.67.

Influencing Factors to Consider

Kohl's has been struggling to boost its sluggish top line since the past many quarters. Sluggish comps and a difficult retail sales scenario are hurting sales at department stores.

The sluggish trend is also reflected in Kohl's share prices on a year-to-date basis due to a challenging sales environment and soft comparable store sales. Notably, in the said period the stock declined 12.2% in comparison to the categorized Retail-Wholesale sector, which showcased growth of 13.2%.

Despite Kohl's continuous efforts to improve its base business, its strategic initiative, 'Greatness Agenda', which was designed to increase transactions per store and sales, is failing to deliver positive results. Though the plan has helped the company to deliver positive comps in all the four quarters of fiscal 2015, the quarterly growth rates moderated gradually, thus posing a concern.

Moreover, comps declined in all the four quarters of fiscal 2016. This is raising concerns over the near term. The company is also witnessing lower spending on apparel and accessories, dwindling store traffic, margin pressure and competition from discount retailers, which are hurting sales at department stores. It is believed that the trend is not expected to improve in the to-be-reported quarter.

Analysts and Hedge Funds Opinions

Kohl's Corporation (KSS) was initiated by Gordon Haskett to “Reduce” and the brokerage firm has set the Price Target at $35 in a research report released on May 9, 2017.

Several other brokerages have issued reports on the company….

  • Kohl's Corporation was Upgraded by Atlantic Equities to “Neutral” on May 4, 2017.
  •  Shares were reiterated by Telsey Advisory Group on Feb 24, 2017 to “Market Perform” and lowered the Price Target to $ 43 from a previous price target of $47.
  • Piper Jaffray Resumed Kohl's Corporation on Feb 17, 2017 to “Neutral”, Price Target of the shares is set at $40.
  • Susquehanna Initiated Kohl's Corporation on Feb 10, 2017 to “Neutral”, Price Target of the shares is set at $41.

In terms of Buy, Sell or Hold recommendations, Kohl’s Corporation has analysts’ mean recommendation of 2.90. This is according to a simplified 1 to 5 scale where 1 represents a Strong Buy and 5 a Strong Sell.

Currently Kohl’s Corporation’s shares owned by insiders are 0.60%. However the six-month change in the insider ownership was recorded -9.77%, as well as three-month change in the institutional ownership was recorded -0.46%.

Also, Director Frank V. Sica sold 14,628 shares of the company’s stock in a transaction dated Thursday, March 2nd. The stock was sold at an average price of $42.32, for a total value of $619,056.96.

Harvey’s Options Volatility Indicator


Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the KSS JUNE 16 2017 37.500 PUT at approximately $1.45. Place a pre-determined sell at $2.90.

Note: No protective stop losses added -- but if you wish to do so make it $0.60.

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