Kohl’s Corporation operates as an omnichannel retailer in the United States. Headquartered in Menomonee Falls, Wisconsin, the department chain offers branded apparel, footwear, and accessories, in addition to beauty and home products through its stores and website.
The company provides its products under recognized brand names such as Croft & Barrow, Sonoma Goods for Life, SO, Food Network, LC Lauren Conrad, Nine West, and Simply Vera Vera Wang. Despite a presence of growth opportunities, Kohl’s continues to bear the brunt of a difficult macroeconomic backdrop and challenging retail landscape.
The stock was recently downgraded by analysts at Morgan Stanley, who stated that profitability expansion “will be harder to come by” in 2025. Significant pressure is being put on sales growth acceleration as Kohl’s faces heightened competition from major retailers and e-commerce giants. But as we’ll see, the consensus trend for both earnings estimates and revenues shows a clear negative tilt.
Kohl’s KSS, a Zacks Rank #5 (Strong Sell) stock, is a component of the Zacks Retail – Regional Department Stores industry group, which currently ranks in the bottom 23% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has over the past year:
Image Source: Zacks Investment Research
Stocks in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when they’re part of a lagging industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
KSS shares have been underperforming over the past year while the general market returned to new heights. The stock is hitting a series of lower lows and represents a compelling short opportunity as we head deeper into the new year.
The struggling retailer recently announced plans to close its San Bernardino, California-based e-commerce fulfillment center and 27 underperforming stores across more than a dozen states in 2025. Former CEO Tom Kingsbury stepped down earlier this month as the department store chain has had trouble adjusting to shifting consumer behavior.
Kohl’s has fallen short of earnings estimates in two of the past three quarters. Back in November, the retailer reported third-quarter earnings of $0.20 per share, missing the Zacks Consensus Estimate by -25.93%. Weak sales in the apparel and footwear segments caused management to lower its full-year outlook.
