The closest peers for Kohl’s are The TJX Companies, Inc. (NYSE:TJX) and Target Corporation (NYSE:TGT). These companies are valued at a premium to Kohl’s Corporation (NYSE:KSS), with trailing earnings multiples of 19 and 16 respectively. The P/Es improve by a few points in each case when looking on a forward basis, suggesting that analysts are expecting significant earnings growth at these fellow retailers. However, while TJX Companies, Inc. (NYSE:TJX) has in fact been doing well- revenue grew 7%, and earnings 8%, in its most recent quarter versus a year earlier- Target Corporation (NYSE:TGT) suffered declines on both top and bottom lines over the same period. As a result we’d avoid Target Corporation (NYSE:TGT), and TJX Companies, Inc. (NYSE:TJX)’s substantial premium relative to Kohl’s doesn’t make it too attractive either.
The company can also be compared to Wal-Mart Stores, Inc. (NYSE:WMT) and to Costco Wholesale Corporation (NASDAQ:COST). Wal-Mart is the cheapest of this peer group of Kohl’s that we’re looking at in earnings terms, with trailing and forward P/Es of 15 and 13 respectively. It should be noted that the retail giant is even less exposed to economic conditions than Kohl’s, with a beta of 0.4, and despite early reports that the company was off to a terrible start to the year Wal-Mart Stores, Inc. (NYSE:WMT) actually managed to report growth in both revenue and earnings in its most recent report. Costco Wholesale Corporation (NASDAQ:COST) achieved 8% revenue growth and 19% earnings growth last quarter from its levels a year ago. However, markets have already priced in a good deal of future growth with even the company’s forward earnings multiple being above 20. We are skeptical that Costco Wholesale Corporation (NASDAQ:COST) can continue to outperform these other retailers by enough to justify its current valuation.
We’re not fans of the recent financial performance at Kohl’s Corporation (NYSE:KSS), but the stock is certainly cheap. As such it might be worth learning more about the company and comparing it to the slightly better-off and slightly pricier Wal-Mart Stores, Inc. (NYSE:WMT) and potentially to TJX as well.
Disclosure: I own no shares of any stocks mentioned in this article.