Core Viewpoint - The retail sector presents challenges for investors due to rapidly changing consumer preferences and retailer adaptability, with Costco and Kohl's demonstrating contrasting performance trends [1][2]. Costco - Costco is well-known for its bulk-selling warehouse model, charging an annual membership fee that grants access to a wide range of goods and services at competitive prices [4]. - The company has maintained high membership renewal rates, consistently around 90%, with a recent rate of 92.7% in the U.S. and Canada despite a membership fee increase [5]. - Membership numbers have grown to 79.6 million, up from 76.2 million, and the company operates 905 warehouses, having opened 20 to 30 new locations annually [6]. - Costco's operating income increased by 15.2% to $2.5 billion in the third quarter, reflecting strong profitability [6]. - Over the past five years, Costco's share price has risen by 203.8%, significantly outperforming the S&P 500's 98.7% increase [7]. - The stock has a high price-to-earnings (P/E) ratio of 56, indicating strong market expectations for continued profitability growth [8]. Kohl's - Kohl's offers a range of moderately priced merchandise but has struggled with declining sales and profits, with fiscal 2024 same-store sales dropping by 6.5% and earnings per diluted share falling by approximately 47% to $1.50 [9][10]. - The company has implemented various initiatives to drive traffic and sales, including integrating Sephora beauty shops and facilitating Amazon returns, but these efforts have not significantly improved sales [9]. - Management projects a further decline in same-store sales of 4% to 6% and diluted earnings per share to fall between $0.10 and $0.60 for the current fiscal year [11]. - The company has experienced leadership instability, with the recent CEO being terminated after a few months, complicating long-term turnaround efforts [11]. - Kohl's board reduced the quarterly dividend from $0.50 to $0.125, a move that typically signals a lack of confidence in future performance [12]. - Over the last five years, Kohl's share price has decreased by more than 55%, and it currently has a low P/E multiple of 9 [12]. Selection - Costco is identified as a better-managed company with consistent execution and growth opportunities, despite its higher valuation compared to Kohl's [13]. - Kohl's is viewed as a less attractive investment due to the current unlikelihood of a turnaround [13].

Market Outlook - Goldman Sachs raised its year-end forecast for the S&P 500 (SPX) to 6,900, up from 6,500, highlighting three stocks for investors to consider [1] - Other major investment banks, including Bank of America, are also increasing their S&P 500 forecasts, reflecting optimism around economic resilience and stabilizing inflation [2][3] - The current SPX stands at 6,263, with a year-to-date increase of 6.49% and a 14.8% rise over the past three months [3] Earnings Projections - Goldman projects S&P 500 earnings-per-share (EPS) to grow by 7% for both this year and next, driven by strong consumer demand and margin expansion [4] - The Federal Reserve is expected to support this growth through earlier and deeper interest rate cuts [4] Stock Recommendations - Goldman highlighted three stocks to watch: Kohl's, Intellia Therapeutics, and Gogo Inc., each linked to structural trends that could drive outperformance [6] Kohl's - Kohl's is viewed as a deep value play with a turnaround catalyst, currently trading down 33.40% for the year but up 20.5% over the past 90 days [7][8] - The company is focusing on inventory discipline, cost-cutting, and enhancing its loyalty program to stabilize revenue [9] - Kohl's is expected to benefit from lower bond yields when the Federal Reserve cuts rates, making it attractive for income-minded investors [10] Intellia Therapeutics - Intellia has seen a 45.3% increase in share price over the past month, focusing on CRISPR-based therapies for rare genetic disorders [11][12] - The company is recognized for its strong intellectual property portfolio and is positioned to benefit from the growing importance of gene therapies [13] Gogo Inc. - Gogo, a leader in business aviation connectivity, has seen its stock price rise 117% over the past three months, driven by strong recurring revenues and a 5G rollout [15][16] - The company has received FAA certification for 42 aircraft types, which covers 70% of its current North American customer base [16] - Gogo's growth is supported by a favorable capital markets backdrop and a strong recurring revenue model [19]

Core Insights - Kohl's stock has experienced a significant decline, with a loss of 80% over the past three years, closing at $8.12 compared to $40.54 previously [3][5] - The S&P 500 index, in contrast, gained 60% during the same period, highlighting the underperformance of Kohl's [3] - An initial investment of $5,000 in Kohl's would now be worth approximately $1,000, while the same investment in the S&P 500 would have grown to nearly $8,400 [4] Financial Performance - Kohl's has paid dividends of $0.50 per share per quarter until recently, when it was reduced to $0.125 per share, resulting in total dividends of nearly $700 over three years [4] - The total return from the initial $5,000 investment in Kohl's, after accounting for dividends, is approximately $1,700 [4] - The company projects earnings of $0.10 to $0.60 per share in 2025, which may not be sufficient to cover the new annual dividend of $0.50 [6] Market Challenges - Kohl's is facing ongoing challenges in the competitive retail industry, with same-store sales declining by 3.9% in the first fiscal quarter [5] - Management anticipates a further decline in same-store sales of 4% to 6% for the year, indicating a challenging outlook [5] - The reduction in dividends is often a warning sign of underlying issues within the company, which is evident in Kohl's current situation [5][7]

Financial Performance - Net sales decreased by 4.1% to $3.0 billion, with comparable sales down 3.9% in the first quarter of 2025[55] - Gross margin increased by 37 basis points to 39.9% of net sales, driven by merchandise mix and inventory management[65] - SG&A expenses decreased by 5.2% to $1.2 billion, representing 36.0% of total revenue, a decrease of 32 basis points year-over-year[55] - Operating income was $60 million, an increase from $43 million in the prior year, with an operating margin of 1.9%[55] - The company expects net sales to decrease between 5% and 7% for the full year 2025[59] - Digital sales decreased by 7.7%, with digital penetration at 24% of net sales compared to 25% in the first quarter of 2024[61] Cash Flow and Capital Expenditures - Operating activities used $92 million of cash in Q1 2025, a decrease of $85 million compared to $7 million used in Q1 2024[80] - Investing activities used $108 million in Q1 2025, down from $126 million in Q1 2024, primarily due to fewer Sephora shop openings[82] - Anticipated capital expenditures for 2025 are approximately $400 to $425 million, including investments in Sephora shops and e-fulfillment center expansion[83] - Capital expenditures are projected to be between $400 million and $425 million in 2025, including investments in Sephora shops and e-fulfillment centers[75] - Financing activities generated $219 million of cash in Q1 2025, an increase of $41 million compared to $178 million in Q1 2024[86] - Cash dividend payments were $14 million ($0.125 per share) in Q1 2025, down from $55 million ($0.50 per share) in Q1 2024[87] Inventory and Working Capital - Inventory increased by 2% year-over-year to $3.1 billion[55] - Working capital decreased to $300 million as of May 3, 2025, compared to $643 million previously[89] - Current ratio declined to 1.09 from 1.21 year-over-year, driven by increased borrowings and decreased cash[90] Tax and Credit Ratings - The effective tax rate for the first quarter was 10.4%, down from 32.5% in the prior year[70] - As of May 3, 2025, corporate credit ratings were downgraded to Ba3 (Moody's), BB- (S&P), and BB (Fitch) with a negative outlook[85] - Net borrowings on the $1.5 billion credit facility were $255 million in Q1 2025, compared to $263 million in Q1 2024[87] - The company was in compliance with all covenants of its senior secured revolving credit facility as of May 3, 2025[92]

Group 1 - The retail sector is highlighted as an attractive investment option for long-term investors, particularly those that offer consistent dividends [1] - Many 'Bricks and Mortar' businesses are reportedly on the verge of significant changes, indicating potential investment opportunities [1] Group 2 - The author, Rick, has over 20 years of experience in trading stocks and options, contributing to the credibility of the insights provided [1] - Rick's work has been featured in various authoritative publications, enhancing the visibility and trustworthiness of his investment perspectives [1]

Group 1 - The article highlights Paul Franke's extensive experience in stock picking and investment strategies, emphasizing his contrarian approach and algorithmic analysis for identifying stocks through a system called "Victory Formation" [1] - Franke's investment philosophy includes using stop-loss levels of 10% or 20% on individual stocks and maintaining a diversified portfolio of at least 50 well-positioned stocks to achieve consistent market outperformance [1] - The "Bottom Fishing Club" articles focus on identifying deep-value stocks or those showing significant positive technical momentum reversals, while the "Volume Breakout Report" discusses stocks with strong price and volume trends [1]

Core Insights - Kohl's Corporation reported a first-quarter fiscal 2025 loss per share of 13 cents, which was better than the Zacks Consensus Estimate of a loss of 22 cents and improved from a loss of 24 cents in the prior year [1] - Total revenues for the quarter were $3,233 million, down from $3,382 million in the same quarter last year, but exceeded the Zacks Consensus Estimate of $3,176 million [1] - Comparable sales declined by 3.9% year over year, which was better than the expected decrease of 6% [1] Financial Performance - Gross margin increased by 37 basis points to 39.9%, surpassing the expected increase of 10 basis points [2] - SG&A expenses decreased by 5.2% to $1,164 million, and as a percentage of total revenues, they fell by 32 basis points to 36% [2] - Operating income rose to $60 million from $43 million in the previous year, with an operating income margin expansion of 58 basis points to 1.9% [2] Financial Health - At the end of the quarter, Kohl's had cash and cash equivalents of $153 million and shareholders' equity of $3,779 million [3] - The company reported net cash used in operating activities of $92 million for the three months ending May 3, 2025 [3] - Kohl's expects capital expenditures to be between $400 million and $425 million for fiscal 2025 [3] Future Outlook - For fiscal 2025, Kohl's anticipates a net sales decline of 5-7% and comparable sales to decrease by 4-6% [4] - The expected operating margin for the year is projected to range from 2.2% to 2.6% [4] - Full-year earnings per share are forecasted to be between 10 cents and 60 cents [4]

Group 1 - The conference call is for Kohl's Corporation's First Quarter 2025 earnings, indicating a focus on financial performance and future initiatives [1] - Trevor Novotny, Senior Manager of Investor Relations, is leading the call, suggesting a structured approach to investor communication [1] - The call includes a question-and-answer session, highlighting engagement with analysts and investors [1] Group 2 - Forward-looking statements regarding projected financial results and future initiatives are made, which are subject to risks and uncertainties [2] - The company emphasizes that actual results may differ materially from projections due to various risks outlined in their annual report [2] - Non-GAAP financial measures may be referenced during the call, indicating a focus on alternative financial metrics for analysis [3]

Core Viewpoint - The recent court ruling regarding tariffs has positively impacted consumer goods companies, particularly Kohl's, which reported better-than-expected Q1 earnings despite ongoing sales declines [1][6][10]. Group 1: Tariff Impact - A U.S. Court of International Trade ordered the lifting of certain tariffs imposed by President Trump, which has led to a positive reaction in the stock prices of consumer goods companies [1][2]. - Companies like Deckers Outdoor and Five Below saw stock increases of 1.9% and 2.6% respectively, while Kohl's stock rose by 4.3% [3][4]. Group 2: Kohl's Q1 Earnings - Kohl's reported a smaller-than-expected loss of $0.13 per share against an analyst forecast of a $0.22 loss, with sales reaching $3.1 billion [6][8]. - The company experienced a 4.1% decline in sales and a 3.9% decline in same-store sales, but managed to improve its gross margin by 37 basis points to 39.9% [7][8]. Group 3: Future Guidance - Kohl's forecasts a sales decline of 5% to 7% through the end of 2025, indicating worsening sales trends compared to the 4.1% decline reported in Q1 [9]. - The company expects to be profitable for the year, projecting earnings between $0.10 and $0.60 per share, which falls short of Wall Street's expectation of $0.67 [10]. Group 4: Stock Valuation - Kohl's stock is currently priced at approximately $8, translating to a valuation of 12.5 times analyst forecasts, which are likely to decrease in line with the new guidance [11]. - If Kohl's achieves the midpoint of its earnings guidance at $0.35 per share, the stock would be valued at around 24 times current-year earnings, which is considered too high given the declining sales and earnings [12].

Core Insights - Kohl's reported revenue of $3.23 billion for the quarter ended April 2025, a year-over-year decline of 4.4% [1] - The EPS for the same period was -$0.13, an improvement from -$0.24 a year ago, with a surprise of +40.91% compared to the consensus estimate of -$0.22 [1] Financial Performance - The reported revenue exceeded the Zacks Consensus Estimate of $3.2 billion, resulting in a surprise of +0.88% [1] - Comparable store sales showed a year-over-year decline of -3.9%, contrasting with the average estimate of 0% based on five analysts [4] - Net sales were reported at $3.05 billion, surpassing the average estimate of $2.99 billion, but still reflecting a year-over-year change of -4.1% [4] - Other revenue was reported at $184 million, slightly above the average estimate of $179.90 million, representing a year-over-year decline of -9.8% [4] Market Performance - Kohl's shares have returned +20.9% over the past month, outperforming the Zacks S&P 500 composite's +6.7% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]