Kohl's Stock Jumps: Is It Time to Buy the Hype?
Kohl's (NYSE:KSS) just posted a Q3 CY2025 that has the market buzzing. Revenue beat expectations, adjusted EPS crushed estimates, and the stock price jumped over 20%. On the surface, it looks like a classic turnaround story. But before you jump on the bandwagon, let’s dissect the numbers and see if this rally is built on solid ground or just clever accounting.
The headline figures are undeniably positive. Revenue came in at $3.58 billion, exceeding analyst estimates of $3.49 billion. Adjusted EPS (earnings per share) landed at $0.10, a significant leap above the predicted loss of $0.17. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) also surpassed expectations, hitting $258 million against an estimated $223.7 million. Even better, management raised its full-year Adjusted EPS guidance to $1.35 at the midpoint, a 108% increase. Free cash flow swung from negative $323 million to positive $16 million.
But here's where the story gets more nuanced. While Kohl's beat revenue expectations, sales still fell by 3.6% year-on-year. Same-store sales also declined by 1.7% year-on-year, although that's a significant improvement from the -9.3% recorded in the same quarter last year. So, while Kohl's is doing better than expected, it's still shrinking. Are they simply shrinking less slowly? And is that something to cheer about?
Michael J. Bender, Kohl’s CEO, claims the results are a “direct reflection of the progress we are making against our 2025 initiatives.” But what are those initiatives, exactly? Details are scarce. It's easy to attribute positive results to vague strategies, but I prefer to see concrete actions and measurable outcomes. The market capitalization sits at $1.76 billion.
The Long-Term Trend: A Troubling Picture
A single quarter doesn't define a company. We need to look at the long-term trend to get a clearer picture. Kohl's revenue over the past 12 months is $15.75 billion, making it a major player in the consumer retail sector. But size can be a liability. Finding incremental growth becomes exponentially harder as you saturate the market. Kohl's needs to either drastically change its pricing strategy or expand into international markets— neither of which seems to be happening.
Looking back three years (adjusting for COVID-19 distortions), Kohl's sales have dropped by 5.4% annually. They haven’t been opening many new stores, and sales at existing locations have been declining. This begs the question: is Kohl's managing a decline, or is it truly on the path to a sustainable turnaround? And this is the part of the report that I find genuinely puzzling. Are these positive numbers just a blip or evidence of a real change?
The surge in Kohl's stock price following the earnings release suggests that investors are betting on the latter. Shares jumped over 30% on Tuesday, pushing them above their levels from a year ago and tripling them from their lows. That's a pretty dramatic swing. But is it justified? How much of this surge is driven by genuine optimism about Kohl's future, and how much is simply a reaction to low expectations and short covering? It's hard to say for sure. News outlets like Kohl's (NYSE:KSS) Beats Q3 CY2025 Sales Expectations, Stock Jumps 21.5% covered the jump extensively.
So, What's Actually Changed?
Kohl's beat expectations, sure. But it's like a boxer who lost the last ten rounds finally landing a lucky punch. It feels good, but it doesn't erase the previous losses. The underlying trend is still concerning. Kohl's is still shrinking, and the long-term sales figures paint a troubling picture. I've looked at hundreds of these filings, and this particular situation feels precarious. There is no reason to be optimistic.
