Kohl's Stock Soars After Better-Than-Feared Quarter

Key Points

• Kohl's reported better-than-expected first-quarter earnings and revenue and delivered its strongest comparable sales performance in more than four years, sending shares sharply higher.
• Despite the encouraging results, Kohl's still reported a quarterly loss and a decline in sales, highlighting that the retailer's turnaround remains a work in progress.
• Wall Street remains cautious on the stock, and recent analyst actions have been mixed, including a Citigroup upgrade to Buy following the earnings report.

Kohl's Corp. NYSE: KSS delivered first-quarter results last week that were better than Wall Street had feared. While sales still declined and Kohl's posted a loss for the quarter, the retailer delivered its best comparable sales performance in more than four years and topped analyst expectations on both earnings and revenue.

The report sent shares soaring, fueling optimism that the retailer's multiyear turnaround effort may finally be gaining traction.

Q1 Results Top Expectations Despite Sales Decline

For the quarter, Kohl's reported a loss of 13 cents per share, matching its year-ago loss and coming in ahead of Wall Street's expectation for an 18-cent-per-share loss.

Revenue of $3.17 billion declined 1.7% from the prior year but exceeded analyst estimates by nearly $177 million. Comparable sales (comps) fell 1.1% year over year.

The company said the decline in sales was driven primarily by fewer in-store transactions.

Within the business, Kohl's proprietary brands were a bright spot, with comps rising 6%. Four lines of business posted flat-to-slightly positive comp growth, including women's, kids, accessories, and home. Men's and footwear were weaker and underperformed the company overall.

The company also strengthened its balance sheet during the quarter, improving its net cash position by more than $800 million and reducing inventory by approximately 8%.

Kohl's Reaffirms Full-Year Outlook

Kohl's reaffirmed its full-year outlook, as it continues to expect comps to range from down 2% to flat compared with 2025. The company also maintained its forecast for an operating margin of 2.8% to 3.4% and earnings per diluted share of $1 to $1.60.

On the earnings call, Chief Executive Officer Michael Bender highlighted the company's encouraging early results, saying, "The progressive improvements from the prior quarter exemplify our ability to execute with agility and make necessary adjustments in our business."

He added, "Moving forward, we remain realistic about the important work ahead of us, but the early results in Q1 give us increased confidence in our ability to execute against our key initiatives."

The company's turnaround strategy has been centered on three primary initiatives: delivering a more curated and balanced assortment, reestablishing Kohl's as a leader in value and quality, and enhancing its omnichannel platform to create a more seamless shopping experience.

Positive Surprise Sparks Sharp Rally

Investors applauded the Q1 report, sending shares above $16 during the session before closing at $15.64, up more than 20% for the day.

The rally was a welcome boost for a stock that has been steadily falling since reaching a 52-week high above $25 in December. Even after the post-earnings surge, the stock remains down roughly 22% year to date.

However, shares have staged a major recovery from the 52-week intra-day low below $8, hit on June 2, 2025. At the current price of around $15.88, it's up more than 95% since then.

The bumpy performance of Kohl's stock is nothing new. The retailer has spent years struggling with declining traffic, intense competition from off-price retailers, and changing consumer preferences, all against a challenging macroeconomic backdrop. As a result, shares have lost more than 70% of their value over the past five years.

Wall Street Remains Skeptical Despite the Rally

While the latest quarter provided some encouraging signs, Wall Street remains cautious on Kohl's. The stock carries a Reduce consensus rating. Among analysts covering the company, six rate the stock a Sell, eight rate it Hold, and just two recommend buying shares.

Following the earnings report, analyst reactions were mixed. One analyst lowered its price target to $14 from $15, while another modestly increased its target to $9 from $8. This week, Citigroup upgraded Kohl's to Buy from Neutral.

The average price target of $14.92 is above the current share price, suggesting analysts see potential downside from current levels. Price targets range from a low of $8 to a high of $22.

Short Sellers Still Have Doubts

Investors have continued to take a bearish stance on Kohl's with roughly 25.8 million shares, or 23.3%, of the float sold short as of May 15. However, that declined from more than 30.5 million shares, or 27.5% of float, at the end of March.

From a valuation standpoint, Kohl's may appear more attractive at current levels. The stock trades at about 6X earnings, a discount to the retail industry's average price-to-earnings ratio of roughly 11.6. It also trades below some of its department store peers. Dillards Inc. NYSE: DDS, which reported better-than-expected earnings in May, trades at about 14X earnings, while Macy's Inc. NYSE: M, which is scheduled to report earnings on Wednesday, trades at roughly 9X earnings.

While Kohl's turnaround remains a work in progress, the latest quarter delivered a positive surprise, suggesting the company's efforts may be starting to pay off. Going forward, investors will be looking for continued improvement in comparable sales and proof that management's strategy can produce sustainable results.