NEW YORK — After analyzing the market position and merchandising strategy of Kohl’s Corp., Smith Barney equity analyst Deborah Weinswig slapped the retailer with a downgrade to its stock while also lowering her 12-month target price to $45 from $60.
Weinswig dropped her rating on Kohl’s shares, which she described as being “mired in merchandising,” to a “hold” with “medium risk” from a “buy” rating.
Investors reacted Thursday by pulling back on the stock, which fell 3 percent at midday, but later closed up 0.07 percent to $41.30.
In her research note, sent out Wednesday night, Weinswig offered three reasons for the downgrade, which also included a lower earnings outlook for 2004, 2005 and 2006. She said recent executive hires by the retailer “are unlikely to give [Kohl’s] the fashion fix that it needs” while the company’s “reactive, rather then proactive approach” to selling goods is a thorny issue that needs to be addressed. Weinswig also said the downgrade was driven by an observation that “Kohl’s competitive advantages are waning.”
Kohl’s declined comment.
Weinswig’s assessment of Kohl’s merchandising centered on the recent hirings and promotions of David Campisi, executive vice president and general merchandise manager of women’s apparel and accessories, and Donald Brennan, executive vice president and general merchandise manager of men’s and children’s wear. She was not impressed, and has reservations about Campisi, who came to Kohl’s from Fred Meyer, a general merchandise and food retailer. Regarding Brennan, which was an internal promotion, Weinswig doubts his ability as a fashion merchandiser.
“We question the potential of an internally promoted executive for bringing dramatic merchandise innovation to Kohl’s,” Weinswig said in her report. “As such, we are increasingly uncertain of the ability of Kohl’s merchandise executives to turn the company around.”
Weinswig said Kohl’s strategy of “applying the same formula” is ineffective. She said the retailer also is missing out on attracting shoppers to its contemporary merchandise offering, as well as the retailer’s “lack of men’s suits and suit separates, product categories that have demonstrated a recent resurgence.”
— Arthur Zaczkiewicz