Kohl’s Shows Signs of Comeback as Holidays Near

When analysts said spending is K-shaped, we didn’t know the K stood for Kohl’s. 

The department store’s shares spiked as much as 36% yesterday after it posted a surprise profit and raised its guidance for the year. Sales flipped to positive growth last month, helping to deliver net income of $8 million, Kohl’s announced yesterday in its earnings call. Though the company still expects sales to fall as much as 4% for the year, that’s a boost from its previous prediction of 5% to 6%. 

The comeback is a promising start to the holiday shopping season for new CEO Michael Bender, who only got the job in a permanent capacity on Monday. After years of floundering, the company’s turnaround plan could be taking effect. 

Building on Meme-mentum

Kohl’s stock hit an all-time low in April, but then it caught the attention of Reddit’s retail traders. The store’s share price surged over the summer as traders piled in, many of them in short positions as they prepared to profit from a rapid rise and fall. The stock has since more than doubled from its April low, but it’s still down more than 60% from 2022.

Kohl’s had a record earnings year in 2021, but it fell into the bargain bin afterward and has been trying to climb back out since:

• Kohl’s was far from the only department store to suffer in recent years as Amazon, Walmart and Target won over shoppers. Sears, JCPenney, Neiman Marcus, Barney’s and others all filed for bankruptcy. To fend off activist investors pressuring Kohl’s to go private and escape a similar fate, the company began its “complete reinvention.” 
• Amid its attempted comeback, Kohl’s went through three CEOs. Bender, its fourth chief in four years, was named permanent CEO this week after serving as the interim chief since May; he replaced Ashley Buchanan, who was ousted following a scandal. Bender’s plan focuses on expanding the store’s selection of jewelry, private-label brands and beauty products via its Sephora partnership.

Saving Kohl’s Cash: Kohl’s is the largest US department store chain by number of retail locations, with more than twice as many as Macy’s. Its turnaround plan has included cost-cutting measures, such as closing underperforming stores and slashing 10% of its corporate workforce. With Deloitte predicting shoppers will spend 10% less this holiday season and PwC predicting a roughly 5% drop, Kohl’s could use the padding on its profit margins.