By Kohl’s Corp (NYSE: KSS) is in focus this morning after naming Ashley Buchanan its new chief executive.
Buchanan, who has most recently served in a similar role at the Michaels Companies, will take the helm from Tom Kingsbury on January 15th, as per the company’s press release on Tuesday.
Ashley Buchanan drove operational efficiencies and improved cash flow during his four years at The Michaels Companies.
He helped the retailer strengthen its footprint in e-commerce as well.
Still, Kohl’s stock is down close to 20% at writing.
Kohl’s stock tanks on weak Q3 earnings
Ashley Buchanan is joining Kohl’s at a time when it’s in a dire need of a turnaround.
It’s a company that just can’t seem to drive sales growth as evidenced in the third-quarter release it posted this morning.
Kohl’s came in well below Street estimates for per-share earnings as net sales declined more-than-expected in its Q3.
Plus, the management also lowered its full-year guidance on Tuesday.
The retailer now forecasts $1.20 to $1.50 of per-share earnings on up to 8.0% decline in net sales in 2024.
So, it’s clear that Ashley Buchanan has a tough job on his hands.
Would he be able to bring Kohl’s back into the green?
Investors will likely believe it when they see it.
That’s the sentiment that is being reflected in Kohl’s stock today.
KSS is struggling with excessive debt
Kohl’s has been fully committed to its dividend strategy to remain attractive for its investors.
On Tuesday, it maintained its quarterly dividend once again at 50 cents per share.
At the same time, however, the retailer is committed to strengthening its balance sheet that’s still crippling under the weight of well over $7.0 billion in debt.
So, Ashley Buchanan is essentially tasked with reducing debt without stealing from shareholder returns – and that’s when the company’s quarterly net income sits at $22 million only.
That reiterates just how difficult of a job does Kohl’s incoming CEO have on his hands.
Is Kohl’s stock a value trap?
Kohl’s is going for less than 7 times its forward earnings at writing but the company’s financials seem to support the low valuation.
In fact, analysts at UBS are convinced that the retail stock could tumble further to $13.50.
Their price target warns of another 10% decline from here – and following the disappointing release today, other investment firms could downwardly revise their estimates for KSS as well.
All in all, unless you’re totally convinced that Ashley Buchanan will succeed in orchestrating an accelerated turnaround at the department store chain, it is more than likely that Kohl’s stock will remain an underperformer in 2025.
KSS is currently down more than 50% versus its year-to-date high in early April.
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