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Kohl's surges 10% after BofA upgrades to buy as retailer sees 'superior reopening trends' versus peers (KSS)

  • Kohl's surged as much as 10% Wednesday after Bank of America upgraded the retailer to buy.
  • BofA said Kohl's is "better positioned to recover from here" and is experiencing "superior reopening trends" relative to its peers, according to the note.
  • The bank assigned a $27 price objective to Kohl's, suggesting 33% upside from Tuesday's close.
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Kohl's is set to soar as the retailer recaptures sales at a faster pace than its competitors, according to Bank of America.

In a note published Wednesday, BofA upgraded Kohl's to buy and assigned the retailer a $27 price objective, which represents upside potential of 33% from Tuesday's close.

Kohl's surged as much as 9.8% to $22.28 in Wednesday's trading session.

Kohl's off-mall format, which represents 95% of stores, and its geographic positioning put the company "in a good position to recapture sales faster than peers," according to the note.

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The bank pointed to Macy's results, which indicated its midwestern locations have seen the best sales results since reopening after the coronavirus pandemic, and its urban markets have underperformed. Kohl's has a high concentration of suburban stores, and 40% of its stores are located in the midwest and south central parts of the country.

BofA also listed Kohl's relatively health balance sheet, strong online sales amid the stay-at-home orders and afterwards, and potential market share grab from JCPenney store closures as reasons to be long the stock.

Additionally, the bank said Kohl's stock is pricing in "a permanent impairment in earnings." Kohl's is down 56% year-to-date. 

While BofA expects Kohl's to see 2021 earnings per share 62% below 2019's levels, it expects the retailer to recover some of the lost earnings starting in 2022. "We expect debt pay down, ecommerce efficiencies, cost cuts and a global sales recovery to help earnings continue to recover in F2022," BofA said.

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