Capital Allocation Trends At Kohl's (NYSE:KSS) Aren't Ideal

As an investor, I'm always on the lookout for companies that make smart capital allocation decisions. Unfortunately, Kohl's (NYSE:KSS) isn't one of them. In this article, I'll explore some of the capital allocation trends at Kohl's that have me concerned.

First, let's take a look at Kohl's capital expenditure (CapEx) allocation. In 2022, the company allocated $600 million to $650 million for CapEx, which includes the expansion of the Sephora arrangement and store refresh activity. While these investments may seem like a good idea on the surface, I can't help but wonder if Kohl's is spreading itself too thin. With a total market capitalization of around $15.7 billion, these CapEx allocations represent a significant portion of the company's value. I would argue that Kohl's should be more selective in its investments and focus on high-return projects rather than trying to do too much at once.

Another concerning trend at Kohl's is its balance between organic growth and acquisitions. Based on the information provided, Kohl's capital allocation strategy appears to be heavily focused on organic growth initiatives rather than acquisitions. While this may seem like a good thing, I believe that Kohl's is missing out on opportunities to grow through strategic acquisitions. By not considering acquisitions as a viable option, Kohl's may be limiting its potential for growth and missing out on synergies that could be gained by combining with another company.