Kohl's (KSS 3.27%) is navigating what may be the most difficult period in its 63-year history. Shares of the department store giant have plummeted 42% year to date, amid falling sales -- testing the retailer's relevance.
Despite these challenges, the company remains profitable and is pushing forward with a turnaround strategy that may spark a stock price rebound. Does the recent weakness make Kohl's a clearance-rack bargain to buy now, or is keeping it in layaway the more prudent move?
Let's explore where the stock might be in a year.
Image source: Getty Images.
A turbulent start to 2025
Kohl's is recognized for its unique blend of private-label and major fashion brands at affordable prices. Even as the model commands a loyal customer following, the company has been caught in a shifting consumer spending environment, with shoppers facing stretched discretionary spending budgets. The retailer now appears to be struggling to maintain its market share against intense competition from other stores and e-commerce players.
This year, the latest headwind is the new tariffs on imported goods implemented by the Trump administration, which have forced Kohl's to adjust its inventory management and diversify its supply chain to mitigate the impact. The company has also been marred by corporate dysfunction, firing its former CEO Ashley Buchanan in early May following an internal investigation.
In the first quarter (ended May 3), revenue fell by 4.1% year over year, reflecting a 3.9% decline in comparable sales, with its digital business underperforming. If there is a silver lining to the results, efforts to control costs and streamline operations allowed the net loss of $0.13 per share to narrow compared to a $0.24 loss in the prior-year quarter.
For the full year, Kohl's expects further sales weakness, targeting a decline in annual net sales between 5% and 7%. While that estimate at the midpoint, if confirmed, would mark a modest improvement compared to the 7.2% drop in 2024, the projected earnings per share (EPS) for 2025 of between $0.10 and $0.60 is below the $0.98 result last year. On this point, it's notable that even with ongoing difficulties, Kohl's is expected to be profitable this year.
Ultimately, the new interim CEO, Michael Bender, has a lot of work ahead to repair the company's credibility and fix the many broken parts of this once industry-leading retailer.
| Metric | 2024 | 2025 |
|---|---|---|
| Comparable sales growth (YOY) | (6.5%) | (4%) to (6%) |
| Net sales growth (YOY) | (7.2%) | (5%) to (7%) |
| Operating margin | 2.7% | 2.2% to 2.6% |
| EPS | $0.98 | $0.10 to $0.60 |
Source: Kohl's Corp. YOY = year over year.
Kohl's turnaround plan
Kohl's is implementing a comprehensive plan to stabilize its finances and improve its foundation to kick-start growth over the long run. To achieve this, the company is focused on reducing debt and rebuilding its cash position.
A key step was the dividend cut announced earlier this year, reducing the quarterly payment to $0.125 per share from the previous $0.50 per-share rate. The new dividend still offers investors a compelling 6.1% yield, and it will also save the company approximately $164 million in cash annually, which will help it address its current $2.1 billion in balance sheet debt.
Additionally, Kohl's is revamping its shopping experience to attract customers back to its stores and website. A significant store refresh initiative covering 613 locations this year should enhance the omnichannel experience, intended to make shopping more engaging and seamless. The company is also adjusting its product mix to better meet customer needs, with a focus on high-value categories like jewelry, which has been a rare bright spot with positive growth.
Furthermore, Kohl's is expanding its partnership with beauty products specialist Sephora, completing a rollout of shop-in-shops across its 1,100 locations and showing promising results. By refining its marketing messaging and highlighting its core strengths, Kohl's aims to reestablish its brand appeal and get back on track for sustainably profitable growth.
My prediction: Uncertainties will keep shares volatile
In my view, it's too early to buy Kohl's stock with conviction, as its numerous uncertainties add to the risk of further downside in a scenario where growth continues to disappoint. Beyond Kohl's temptingly high-yielding dividend, I believe the prudent move is for investors to avoid it for now, as I predict the stock will remain volatile and could be trading at a lower price this time next year.
