Shares of Kohl's (KSS 3.25%) are jumping on Wednesday, up 23% as of 3:43 p.m. ET. The jump comes as the S&P 500 and the Nasdaq Composite both had modest gains.
The Wisconsin-based retailer reported its second-quarter earnings, revealing that while sales continue to shrink, it was able to beat Wall Street's expectations for the quarter.
NYSE: KSS
Key Data Points
Kohl's earnings beat Wall Street's modest expectations
In its most recent quarter, Kohl's delivered earnings of $0.56 per share on sales of $3.35 billion, when Wall Street had expected $0.29 cents per share on $3.32 billion in sales.
Cost cuts and lower inventory helped drive down costs and improve margins, and while sales continue to shrink with a 4.2% decline in comparable-store sales year over year (YOY), that decline is slowing. Management has emphasized a leaner operating model, improved merchandising, and stronger partnerships to regain consumer traffic. The company's turnaround efforts are showing signs of working.
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Kohl's is one of the latest meme stocks
That turnaround potential has helped mint Kohl's as a meme stock with retail investors convinced Wall Street has taken too pessimistic a view. This meme rally has seen the stock rise nearly 150% since a low in April.
I think this meme rally is bound to run out of steam, however. Increased competition, ongoing sales issues, shifting consumer behavior, and pressure from tariffs is going to make a full turnaround extremely difficult. I would stay away from Kohl's and brick-and-mortar retail in general.
