The Bottom Is in for Kohl’s, But Let the Share Price Come to You

Key Points

• Kohl's share price hit its bottom in spring 2025 and is likely to trend higher over the long term; however, investors should exercise caution in the back half.
• Short selling and short covering are factors to be considered; volatility is the likely outcome.
• The dividend comes with risks, but appears safe for 2025; revenue growth is expected to resume in fiscal year 2026.

After years of struggling with post-pandemic normalization, supply chain issues, consumer headwinds, and competition in the retail sector, it appears that the bottom is in for Kohl’s NYSE: KSS stock. The stock price surged more than 40% in a single day, confirming support at long-term lows coinciding with the 2020 sell-off.

The move was driven by the increasing potential for a legitimate return to growth and resumption of dividend increases, which are truly bullish catalysts. However, short interest, short covering, and a short squeeze are factors to consider, as they can lead to increased volatility. 

The takeaway is that Kohl’s belongs on the watchlist; it is a candidate for speculative positions, but investors should not chase its price higher because whipsaw action is virtually guaranteed for the remainder of Q3 and potentially 2025.

Whipsaw action is virtually guaranteed because, while a return to growth is at hand, the company is still deep in the weeds, its dividend comes with risks, and the short interest in late June was still running at nearly 50% with no signs of decreasing.

The risk is that shorts will reposition at higher levels, cap gains, and spark another significant decline in share prices before the bottom is confirmed. 

Analysts and Institutional Activity Align With Kohl’s Bottom: Risks Remain

The analyst's activity isn’t robustly bullish or even robust, but the trends align with a market bottom. The Q1 earnings release led to a few price target reductions but no downgrades; it also resulted in several reaffirmed price targets and price target increases, which halted the downward trend. 

The caveat is that the targets align with the late-July consensus, which forecasts a 30% downside relative to the critical resistance target. That is the long-term, 150-week exponential moving average, which has acted as a downtrend line since May 2022.

It is a prime target for solid resistance, potentially for short selling, and a pivot point for the market when and if it is crossed. 

Institutions show a degree of faith and conviction in Kohl’s turnaround. Not only do they own 98% of the stock, but the group has been buying robustly all year. The total activity has declined since the year’s start, but has been bullish on balance every quarter, including the first three weeks of Q3, providing a solid support base and market tailwind. 

High-Yielding Kohl’s Dividend is Safe, For Now

Kohl’s dividend cut early in 2025 is a key factor in the stock price decline. However, the company appears to be able to sustain the payment for at least a few more quarters, assuming results remain stable sequentially.

The outlook, however, is positive, with the full-year guidance expecting profits and the long-term outlook a return to growth.

It may not come by year’s end, but growth is forecasted to resume in F2026 and produce sufficient earnings for a sub-100% payout ratio. 

Until then, the balance sheet remains healthy and well-capitalized, providing management with flexibility.

The key takeaways from Q2 are that cash and total assets are down, but offset by increased inventory and reduced debt and liabilities, which resulted in leverage at ultra-low levels and equity down by less than 1%. 

Kohl’s Downtrend Is Intact

As it stands, Kohl’s downtrend is intact. The market surged on short-covering but showed resistance at the critical level, backed by an incredibly high volume. It is possible that short-sellers will continue to cover, but it is more likely that they have already begun to reposition at a higher level, specifically at $21.40.

In this scenario, the upside in KSS stock is limited in Q3, and there is a high potential for sideways price action or a dip to retest support. Because meme-mania may also be involved, support is uncertain and may not materialize until the price action falls to $10 or lower.