Consumer stocks have been in the spotlight due to strong earnings in the past few days. While many trends point to a strong holiday season, retailers that are known for providing low prices and deals could fare even better with inflationary fears and supply chain shortages still making headlines.
One company that could break to new highs this holiday season is Kohl’s (KSS). The retailer chain reported on Thursday that both earnings and revenues beat expectations, and the company raised guidance for the fiscal year.
With revenue jumping to $4.8 billion, it’s no surprise shares moved higher, and towards 52-week highs last seen in the early spring.
Thanks to this strong growth, even though shares are up a staggering 98 percent in the past year, shares are still trading inexpensively at around 11 times forward earnings.
Action to take: Investors may like shares here, as the company recently doubled its dividend. The current yield of 1.7 percent is still on the low side, and there’s room for further increases in the future.
For traders, the January $65 calls, last going for about $3.65, could continue to move higher into the holiday season as the company reports preliminary numbers. The trade will expire a bit before the next earnings report, but a year-end rally in this retailer could still lead to high-double to low-triple-digit returns.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.