Thanks to his success at Burlington Stores, Inc. (BURL), Thomas Kingsbury was recognized as one of the Top CEOs in Retail by Institutional Investor magazine and was inducted into the National Retail Federation’s Retail Industry Hall of Fame.
Kingsbury served as the Chief Executive Officer (CEO) and President of Burlington Stores from 2008 to 2018. While at Burlington, the retailer had its second initial public offering (IPO) at $17 per share. As we type, it trades at $202.10. At IPO time, Burlington had 521 stores and $4.4 billion in annual sales. Today, Burlington has more than 900 stores, and its 2022 sales were $8.7 billion. (1)
Kingsbury was named to Kohl’s Corporation (KSS) Board of Directors in 2021. He took over as interim CEO after the departure of Michelle Grass and was named full-time CEO in February 2023. (2)
Kohl’s is a leading omnichannel retailer and is one of the largest department store chains in the United States, with over 1,100 stores in 49 states. The company offers a wide range of products, including clothing, footwear, jewelry, beauty products, electronics, and housewares, as well as a number of exclusive and private label brands. In recent years, Kohl’s has also expanded its online presence and offers a robust e-commerce platform.
The retailer has historically catered to middle-income consumers, and its pricing strategy is aimed at providing value for money. The company offers frequent sales, discounts, and promotions, which appeal to shoppers looking for affordable options.
In total, the new Kohl’s CEO has almost 40 years of experience in the retail industry. While Wall Street and shareholders are interested in Kingsbury’s ability to execute his turnaround plan for Kohl’s, we are interested in his insider trading record.
Despite all his success at Burlington, Kingsbury never bought BURL stock. In fact, he did nothing but sell and sell to the tune of $139.3 million. His purchase of 92,500 shares of KSS at $21.82 for a little more than $2 million was his maiden buy. (3)
In our view, the newly appointed CEO’s investment is a vote of confidence in his ability to do for Kohl’s what he did for Burlington. Of course, you know the mantra by now, past performance is no guarantee of future success.
What we do know is that analysts have a consensus one-year price target of $27.57 and the company currently pays an annual dividend of $2.00 per share (8.5% yield). Aside from the COVID year of 2020, when they paid a one-time dividend of $0.70, KSS paid a quarterly dividend since February 2011. During that time, the quarterly dividend fluctuated between $0.25 per quarter to as much as $0.61. (4)
Wall Street sees Kohl’s earning $2.40 per share (EPS) in 2023, up from a loss of $0.15 last year. The street forecasts the bottom line hitting $3.07 next year. Since sales are expected to remain relatively flat at $16.88 billion this year and $16.9 billion next year, bottom line growth will need to be the result of lower costs and higher profit margins.
The typical peer trades at 6.4 times earnings (P/E). If KSS hits Wall Street’s predicted $3.07 and trades with the industry average P/E, shares would only trade for $19.65. For the last half-decade, investors valued the retail at an average P/E of 16.20. Apply that number to 2024’s consensus earnings and the potential price target jumps to $49.73. As of this keystroke, Kohl’s trades for $23.54.
OVERALL: CEO Thomas Kingsbury’s retail track record at BURL is noteworthy as is his insider trading activity. By his own admission, the CEO’s plan will take time to bear fruit for Kohl’s Corporation (KSS), which means its share price could have its ups and downs along the way.
With an 8% dividend, subject to change of course, shareholders can afford to be patient while waiting for the turnaround plan to take hold. KSS is only appropriate for investors with above-average risk tolerance and a time horizon of at least 18-24 months.
1 – https://www.bizjournals.com/milwaukee/news/2023/03/09/kingsbury-a-man-with-a-four-part-plan-for-kohls.html?utm_source=sy&utm_medium=nsyp&utm_campaign=yh
2 – https://investors.kohls.com/news-releases/news-details/2023/Kohls-Appoints-Tom-Kingsbury-as-Chief-Executive-Officer/default.aspx
3 – https://www.secform4.com/insider-trading/1371136.htm
4 – https://investors.kohls.com/stock-information/dividends-and-splits/default.aspx