Weaker Sales, Slower Deliveries Contribute Kohl's (KSS) Inflated Inventory Levels; Stifel Affirms at 'Buy'

Stifel affirms its Buy rating and $85 price target on Kohl's (NYSE: KSS) following Thursday morning's Q1 results announcement.

Analyst Richard Jaffe noted that Kohl's posted Q1 EPS of $0.63, compared with the firm's $054 outlook. Comps rose 1.4 percent, which was slightly below Stifel's expectation amid weakness in February, but offset by gaines in March and April.

Jaffe noted higher inventory levels from today's report. The analyst commented, Inventory levels are inflated, up 4% y/y per square foot by our estimation, driven by the weaker sales than expected during the quarter and possibly late deliveries from the West Coast port slowdown. This may result in margin pressure in 2Q, similar to Macy’s current situation. We anticipate JWN’s ($76.17, Hold) inventory levels will be above plan as well, due to issues related to the Port slowdown. (JWN reports 1Q earnings after market close today). We await further information about quality of inventory and the outlook for 2Q on the call.

Given that Kohl's didn't update its previous FY15 outlook calling for EPS of $4.40 to $4.60 and comps up 1.5 to 2.5 percent, Jaffe says his estimates are under review.

For an analyst ratings summary and ratings history on Kohl's click here. For more ratings news on Kohl's click here.

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