Analyst Note| David Swartz |
No-moat Kohl’s blew by our 2021 second-quarter sales and profitability estimates as store traffic improved, pricing was strong, and cost containment was solid. The company’s 12.8% operating margin came in far above our 7.1% forecast and was its best in any second quarter since 2011. For comparison, Kohl’s operating margin in (prepandemic) 2019’s second quarter was below 9%. Given the second-quarter result and outlook for the rest of 2021, we expect to raise our per share fair value estimate of $47 by a high-single-digit percentage. However, we view Kohl’s shares as fully valued after the mid-single-digit percentage increase on the results.