Shares of department store chain Kohl’s Corp. (KSS) spiked last week on a bullish note from a team of analysts on the Street who see the company as well positioned for the upcoming holiday season. While the retailer initially sank Thursday after posting mixed earnings results in the the third quarter, Baird thinks the stock is a buy thanks to an improving product portfolio and strong loyalty position. (See also: Amazon Could Take $60B in Apparel Retail: Fitch.)

In Q3, Kohl’s reported a slight revenue surprise, indicating that store traffic and sales picked up in late October after a lull in September. Chief Executive Officer Kevin Mansell attributed a gross margin decline to higher shipping costs associated with a boost in online orders, stating that he is “super confident” that the company is set up for a strong year-end finish.

Encouraging Numbers

Following the earnings report, Baird analyst Mark Altschwager upgraded KSS to outperform from neutral. With a price target of $47, he expects the retail stock to gain about 12.6% over the next 12 months.

Cost savings and inventory reduction initiatives should provide strong near-term visibility into KSS’s free cash flow, according to Altschwager. The analyst noted that even if his thesis is wrong, he still views the stock as favorable due to its 5% or higher dividend yield, buybacks and takeout speculation protecting downside. “Looking ahead, we believe a more pragmatic growth outlook from management, aggressive actions on the cost front, and momentum with traffic and omnichannel initiatives result in better risk/reward for shares,” added the Baird analyst.

Trading down 4.6% on Tuesday at $41.08, KSS reflects an approximate 12.1% decline year-to-date (YTD) versus the S&P 500’s 15.5% increase over the same period. (See also: Kohl’s Dips as New Partner Under Armour Prospers.)

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