Shares of Kohl's (KSS 24.00%) 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.
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.
