Jefferies Looks to Credit Penetration Bump for Kohl's

Jefferies provided color on Kohl's (NYSE: KSS) June same-store sales and stock spike in a research report published today, noting that the company's work with Capital One (NYSE: COF) should aid in customer credit expansion and penetration in the retail market. Jefferies has a Buy rating and $59 price target on Kohl's.

In the report, Jefferies stated, "Three reasons KSS shares are spiking today: 1) Management indicated sales improved in recent weeks as inventory units started to build, hence validating the bull thesis to some extent that comps should improve as the inventory position gets more aligned with the pricing strategy; 2) June SSS not great, but exceeded informal expectations; 3) Low end of EPS guidance affirmed at a time when we think many thought a big miss was coming."

Later in the report, Jefferies noted, "Kohl's is working with Capital One (COF, $55.10, Buy) to expand the number of credit customers as it takes a more analytical approach to analysing data on “thin file” credits. This should lead to a higher rate of approvals for potential credit customers this fall provided certain deadlines are made in October."

Kohl's current credit penetration is around 56%, according to Jefferies, versus some markets' penetration of over 60%.

Shares of Kohl's were trading at $47.36 at the time of posting, up 7% from Tuesday's market close.