Shares of discount retailer Kohl's (KSS +0.42%) rallied 24.7% this week through Thursday trading, according to data from S&P Global Market Intelligence.
Kohl's stock had been under pressure this year, not only because tariffs threatened a portion of its apparel business, but also due to continued revenue declines amid the shift to e-commerce as well as the recent firing of its CEO.
Earlier this week, there was some relief on the tariff front regarding the highly punitive China tariffs put on in early April. In addition, the company also proposed refinancing a significant portion of its debt, which would extend the maturity of that debt from this year to 2030. Finally, the company also declared its dividend, perhaps allaying fears of a cut amid Kohl's declining same-store sales.
NYSE: KSS
Key Data Points
Leaderless Kohl's could get some relief
Kohl's stock had fallen hard this year already, and still remains down 40% for 2025 even after this week's rally. The company's reported declines in same-store sales and profits had already hurt the stock in addition to ongoing tariff fears. Then on April 30, the company fired ex-CEO Ashley Buchanan, after the Board discovered unusual contracts made between the company and both a vendor and consultant with whom Buchanan had a personal relationship.
In addition to the C-Suite turmoil, which hasn't yet been resolved, the company also had about $353 million in debt maturing this year -- an amount greater than last year's profit level and this year's reduced EPS guidance.
As a result, short interest in Kohl's had reached nearly 50% as of April 30. But with short interest that high, any positive news could be fuel for a short-covering rally.
On Monday, Kohl's, along with other retailers who import goods and clothing from China, rallied after both the U.S. and China announced a rollback of tariff levels for 90 days while trade talks proceeded. It's unclear what percentage of goods sold in Kohl's are imported from China, but some estimates put it as high as 20%. The ratcheting down of tariff tensions also offered relief in a broader economic sense, which may help with flagging consumer confidence and lead to more consumption. That would also benefit Kohl's.
In addition to the Chinese tariff rollback, Kohl's also announced a proposed refinancing for its debt maturing this year, offering $360 million in notes due in 2030. Interestingly, this debt proposal is secured by 11 Kohl's distribution centers and an e-commerce facility. The secured nature of the debt could lower the interest rate the company must pay, and it also showed that the company has some owned assets it may be able to utilize or sell in a worst-case scenario. In any case, should the notes close, it would extend Kohl's maturity runway to 2029, when just $42 million of notes are due.
Finally, the company also declared its $0.125 quarterly dividend, which perhaps allayed fears that the company would cut the dividend amid falling sales and profits.
Image source: Getty Images.
A short-covering rally isn't a reason to be a bull
Kohl's earnings have fallen from $2.28 per share in 2023 to $0.98 in 2024, to a forecast $0.10 to $0.60 per share for all of 2025. It's not a good trend, and the uncertainty around its new leadership as the Board looks for a new CEO only adds to the lack of visibility on a turnaround.
While this week saw a big jump on some incremental good news, that was likely the result of a big short-covering rally. Short sellers, who likely had gains in their short positions already, may have been quick to book profits as the incremental positive news on tariffs, debt refinancing, and the dividend all happened this week.
Still, none of these positive news items indicate a fundamental turnaround in the business. Kohl's is still in a tough spot, as brick-and-mortar stores are increasingly disrupted by e-commerce and other tough competitors. So while Kohl's may have had a good week, it's still a highly risky stock from which investors are better off steering clear.
