Kohl's Corporation Common Stock (KSS) fair value

ACCE thesis

Kohl's runs a national chain of department stores selling apparel, footwear, beauty and home goods, with its Sephora shop-in-shops and Kohl's-branded private label as the main draws. The company trades at 9.6 times trailing earnings and 8.5 times forward, a multiple that prices in continued decline, since revenue fell 0.9% and operating margin sits at 4.6%. Its 40.5% gross margin is the number to watch: it shows the merchandise mix still earns decent pricing, so the question for a deeper look is whether cost cuts and store reductions can lift operating margin without further top-line erosion. The stock earns a 62 out of 100 on our score and sits outside any index, which keeps coverage thin and may leave the valuation gap wider than the fundamentals alone justify. A 6.7% return on equity says the business is not yet earning its cost of capital, so this is a turnaround case that needs evidence of margin repair before it earns a position.