Kohl's (KSS) quarter is provoking a debate over what punishment is sufficient for the stock
Shares were pressured significantly pre-market which has carried into the early trading day, with the stock hitting its lowest levels in six months on Tuesday. Kohl's shares were down 9% to $64.57 as of 12:30 p.m. ET.
The stock is drawing pointed criticism from analysts as shares tank into the morning session. The critiques of the finer points of the release are beginning to form the basis for a justification of why the stock is sliding swiftly despite sailing past analyst estimates.
Analysts were quick to pore through the print and rationalize the razed stock price.
"Placing shares under near-term pressure, $258 million in operating income missed our model by 9%," JPMorgan analyst Matthew Boss wrote in a note on Tuesday morning.
He noted that misses on these factors coupled with a minor guidance raise suggest the stock does indeed deserve the "penalty box."
"Importantly we note while inventories exited the quarter, we suspect this to have been negatively impacted by the retail calendar shift in line with peers," Boss added. "Recall, prior FY18 guidance embedded gross margin expansion of 25-30 basic points which would now imply flat fourth-quarter performance at the high-end of prior guidance remains unchanged."
The company's over 30% rise to this stage in the year makes it difficult to justify a continued surge as well and instead makes the retailer a prime target for profit taking amid a selloff in numerous sectors.
That trend could stand to worsen if Federal Reserve policy continues to favor tightening, which might restrict the purchasing power of the every-day Americans propping up Kohl's continued quarterly successes.
However, not all were ready to discount the discount retailer. Instead, many are looking for new entry points.
"This company executed far superior than many of its department store peers including Macy's (M) and Nordstrom (JWN) , yet shares are receiving zero credit for it," Jim Cramer's Action Alerts Plus team wrote.
The team, which has held Kohl's stock in its charitable trust for some time, noted that they would be inclined to buy again if the stock slump worsened.
"Overall, the nitpicking on operating income, comps, and guidance is what is going to weigh on the stock today," the team acknowledged. "The stock's selloff today looks overdone, but it's tough to challenge the bear market we are presently in. So, we say let the stock settle down and see if it can approach a price that yields closer to 4% (~$61), and then repurchase the stock previously sold at higher levels."
Black Friday Boost
The catalyst that could be upcoming to promote buyers at even the approximately $65 per share level that the stock has been dancing around on Tuesday is the promise of black Friday and holiday shopping.
"I feel really, really good about the holiday season," CEO Michelle Gass told analyst on the call this morning. "We're incredibly well positioned and we are bullish headed into the holiday season."
She hammered home her confidence by outlining growth engines in digital shopping, rewards and loyalty program pickup, and the closure of competing stores like Sears (SHLD) and Toys R' Us.
Cramer warned this morning that it is a good time for buying, but that catalysts must be present.
With Black Friday just a few days away, traders hit by the market might be enticed by the expectation of a big black Friday buoyed by a strong consumer.
Bears Winning the Battle
In the meantime the bears have taken control of the checkout line, as Real Money technical analyst Bruce Kamich put it.
So, as investors willing to be on the bounce-back on holiday shopping bide their time today, it might be worth watching the technicals to make they pick the proper entry point.