Kohl’s Posts Another Kitchen Sink Quarter, But New CEO Has a Plan

Key Points

• Kohl’s operates over 1,100 department stores in the United States and owns over $6 billion of real estate, as its market capitalization falls under $1 billion.
• Its Q4 2025 earnings commendably beat consensus expectations, but a gloomy fiscal 2026 forecast toppled shares by over 25%.
• Kohl's new CEO, as of Jan. 15, 2025, was the former CEO of The Michaels Companies and an executive at Walmart's Sam's Clubs came armed with a three-pillar turnaround strategy.

Department store operator Kohl’s Co. NYSE: KSS shares sank to all-time lows following its fiscal fourth quarter of 2025 earnings report. While the company posted a commendable earnings-per-share (EPS) beat, the forward guidance was gloomy.

Furthermore, the new CEO Ashley Buchanon, who took the helm on Jan. 15, 2025, formerly the CEO of The Michaels Co., didn’t mince words or prop up hopes of an immediate turnaround. Instead, he made it a point to ground expectations, emphasizing any turnaround would take time. Additionally, Kohl’s cut 10% of its corporate workforce, shuttered 27 stores in January and trimmed its dividend by 75%.

With declining consumer confidence and tightening budgets, the retail/wholesale sector is feeling the sting as retailers like Macy’s Inc. NYSE: M and even off-price leaders like TJX Companies Inc. NYSE: TJX and Ross Stores Inc. NASDAQ: ROST trading near 52-week lows face a tough start to the year. However, Kohl’s new CEO also came up with a plan.

Kohl’s Three Pillar Comeback Strategy

Investors believed Kohl’s had posted its kitchen sink quarter in fiscal Q3 to set the bar low for the new incoming CEO. Unfortunately, fiscal Q4’s forecast was even more of a kitchen-sink quarter. CEO Buchanan said, “…this turnaround, while very achievable, is going to take some time. Progress starts with the actions we are taking in 2025 to address opportunities and better serve our customers.” He outlined the three main pillars of the turnaround strategy:

• First, Kohl's will offer a more balanced, curated assortment for all customers. Lately, the company has largely focused on new products to attract new customers while ignoring the products lauded by its core customers. Kohl’s will refocus on categories where it lost traction, like fine jewelry, proprietary brands and petites. However, they will continue to prioritize key growth categories like Sephora, Home Décor and Impulse.
• Second, Kohl’s will reestablish itself as a leader in quality and value. The company will enhance its promotions to drive even more value. They will elevate their proprietary brands like Sonoma and Flex, which provide value and quality that are exclusive reasons to shop at Kohl’s. Lately, its promotions, which are key to its value proposition, have grown its excluded brands list to be too large. The percentage of sales that are excluded from coupons reached an all-time high in 2024, causing confusion and mainly frustration with its most loyal customers.
• Third, Kohl's will deliver a frictionless shopping experience by enhancing the omnichannel platform. They want customers to have consistent experiences across all channels to restore trip assurance for key products. They will ensure that more basic and Essential items are in stock with greater buy depth and supply chain agility. They will optimize store layouts.

Buchanon again reiterated that this is no quick fix: “And last, this will take some time. I want to be realistic in how we are setting our expectations. My full review of the business and go-forward strategy is still ongoing. The actions we are taking in 2025 are a step in the right direction, but there's more work to be done to unlock this company's full potential. We will have the details on additional initiatives later in the year.”

Unfortunately, this didn't inspire much confidence in the stock, as evidenced by plunging 24% the following day to continue falling another 11% in the following days.

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The Q4 EPS Beat Was Commendable

The earnings report wasn't all bad. Kohl's posted an EPS of 95 cents, beating consensus estimates by 23 cents or 27%, which was impressive. However, revenues fell 9.4% year-over-year (YOY) to $5.17 billion, which missed the $5.19 billion consensus analyst estimates. Furthermore, comparable sales fell 6.7% YOY. Inventory, which was previously consistently falling, grew in the quarter by 2% YOY to $2.9 billion.

Forecasts for Fiscal 2026 Were Gloomy to Say the Least

The fiscal full-year 2026 financial guidance was the nail in the coffin. Management now expects EPS of 10 cents to 80 cents versus consensus analyst estimates of $1.18. Revenue expectations are for $14.32 billion to $14.63 billion, firmly missing consensus analyst estimates for $15.45 billion. Comparable sales are expected to fall by 4% to 6% YOY.

Which leaves the question: Was this the final kitchen sink quarter? Did management lower the bar for estimates so low that they could impress in the next earnings report? Can the new CEO, who is a former Walmart Inc. NYSE: WMT executive, pull off the turnaround?

The market is hedging its bets with the worst-case scenario as shares reach all-time lows, which could offer a value opportunity as the stock’s market cap has fallen to less than $1 billion. In contrast, its real estate holdings alone are worth more than $6 billion.