Retail Reality Check: JPMorgan Flags Kohl's Leverage Risks, Sees Signs of Stability At Vail And Foot Locker

JPMorgan analyst Matthew Boss updated quarterly models, maintaining an Underweight rating for Kohl's due to declining core sales and rising leverage, despite in-store efforts; he forecasts FY25 EPS of $0.56 and FY26 EPS of $0.53, above Street estimates. Boss suggests Vail Resorts may be nearing a growth pivot, driven by its premium portfolio and resilient customer base, projecting FY25 adjusted EBITDA at $866 million and FY26 at $908 million while maintaining a Neutral rating. For Foot Locker, despite challenges, Boss anticipates improved EPS, forecasting $1.10 for FY25 and $1.65 for FY26, citing Dick's Sporting Goods' acquisition and reiterating a Neutral rating.

Analysis

JPMorgan's latest retail sector update presents a nuanced outlook. For Kohl's Corporation (KSS), despite positive contributions from in-store initiatives like Sephora and Home Décor, the analyst underscores significant long-term risks stemming from persistent revenue declines in core segments such as apparel, footwear, and legacy homes. Compounding these concerns are structural risks to Kohl's extensive store footprint and a troubling leverage situation, with adjusted debt/EBITDAR at 3.6x at the end of 2023, substantially above the company's ~2.5x target, and projected by JPMorgan to exceed 4x through 2024–26 due to continued same-store sales pressure and margin erosion; this bleak operational view contrasts with the analyst's fiscal year 2025 and 2026 EPS forecasts of 56 cents and 53 cents respectively, which are notably above Street estimates, though the stock retains an Underweight rating with an $8 price target. Conversely, Vail Resorts (MTN) is potentially nearing a growth inflection point as fiscal year 2025 concludes, supported by the return of its former CEO and distinct growth drivers including a premium resort portfolio, consistent upfront revenue from its Epic Pass strategy, and a resilient high-income skier base. JPMorgan projects Vail's fiscal year 2025 adjusted EBITDA at $866 million and fiscal year 2026 at $908 million, both slightly ahead of consensus, maintaining a Neutral rating and a $167 price target. Foot Locker (FL) has faced headwinds from inconsistent same-store sales, heightened promotional activity, and shifts in brand allocation, particularly with Nike. However, the planned $2.4 billion acquisition by Dick's Sporting Goods is anticipated to revitalize the business by creating a larger global retail sports platform, enhancing brand partnerships, and improving omni-channel capabilities, with JPMorgan forecasting fiscal year 2025 EPS at $1.10 (above the Street's $1.00) and a rise to $1.65 in fiscal year 2026, leading to a reiterated Neutral rating and a $24 price target.

Key Decisions for Investors

• Investors should remain cautious on Kohl's (KSS) due to its deteriorating core sales and escalating leverage, despite analyst EPS forecasts beating consensus, and closely monitor its ability to mitigate structural store footprint risks.
• Consider observing Vail Resorts (MTN) for evidence of the projected growth pivot and the impact of its Epic Pass strategy, as the company's premium assets and resilient customer base support a Neutral outlook with potential upside.
• For Foot Locker (FL), a prudent approach involves monitoring the integration progress and synergistic outcomes following the Dick's Sporting Goods acquisition, given the existing operational challenges, while acknowledging the analyst's improved EPS outlook.