Kohl's Stock Jumps: Is the Department Store Ready for a Comeback?
Kohl's (KSS) just reported a Q3 CY2025 that, on the surface, looks pretty good. The stock jumped 21.5% – a clear indication that the market was caught off guard. Kohl's (NYSE:KSS) Beats Q3 CY2025 Sales Expectations, Stock Jumps 21.5% Revenue came in at $3.58 billion, beating analyst estimates of $3.49 billion. Adjusted EPS of $0.10 also blew past expectations, which were projecting a loss of $0.17 per share. Even adjusted EBITDA, at $258 million, exceeded the consensus of $223.7 million.
But before you start popping champagne, let's dig a little deeper. That 2.5% revenue beat? It's sitting on top of a 3.6% year-on-year decline. So, they exceeded lowered expectations while still shrinking. Think of it like this: if you expect to crash your car into a tree at 50 mph, but you only hit it at 40 mph, is that really a win?
The Devil in the Same-Store Sales
The real red flag, in my opinion, is the same-store sales figure. They fell 1.7% year-on-year. Sure, it's better than the -9.3% from the same quarter last year, but that's hardly a reason to throw a party. This suggests Kohl's is still struggling to attract and retain customers. Management is touting its "2025 initiatives," but are those initiatives actually resonating with consumers, or are they just rearranging the deck chairs on the Titanic?
Kohl's CEO Michael J. Bender stated that the results are "a direct reflection of the progress we are making against our 2025 initiatives." But here's the question I keep asking myself: What are these initiatives? The press release is frustratingly vague. Are they improving the in-store experience? Are they finally figuring out e-commerce? Are they offering compelling products that people actually want to buy? I've looked at hundreds of these filings, and this level of hand-waving is unusually high.
Free cash flow paints a similar story. It went from negative $323 million last year to positive $16 million this year. A massive swing, no doubt. But $16 million for a company with a $1.76 billion market cap? It's a drop in the bucket. Is this a sign of genuine turnaround, or just the result of aggressive cost-cutting that can't be sustained?
Guidance and the Long Game
Management raised its full-year Adjusted EPS guidance to $1.35 at the midpoint, a 108% increase. That sounds impressive until you remember where they're starting from. Going from near-zero to $1.35 is easier than going from $5 to $6. And given the overall economic climate (an "uncertain macroeconomic environment," as Bender puts it), can they really maintain this momentum?
Kohl's long-term sales performance is also concerning. Over the past three years, sales have dropped by 5.4% annually. That's not a blip; that's a trend. They claim they benefit from a "well-known brand," but brand recognition only goes so far if people aren't buying your stuff.
To be fair, turning around a department store chain in the age of Amazon is like trying to parallel park a cruise ship. It's a massive, complex undertaking that requires a complete overhaul of strategy and execution. Maybe Kohl's is on the right track. Maybe these Q3 results are a genuine turning point. But I'm not convinced yet.
A Temporary Reprieve, Not a Resurrection
I'm not buying the hype. Kohl's beat expectations, yes, but the underlying numbers still tell a story of a company struggling to stay relevant. They're exceeding expectations that have already been lowered, and that's hardly a reason to celebrate. The market's reaction seems overblown, fueled more by relief than by genuine optimism. I'll need to see a sustained period of growth, not just a single quarter of slightly-less-bad results, before I change my tune.
