Kohl’s (KSS) is under fire again. The retailer’s stock dropped over 20% this week after multiple analysts flagged weakness in foot traffic, declining store conversions, and lackluster execution on key turnaround strategies. With consumer spending shifting and department stores under increasing strain, investors are starting to question whether Kohl’s can deliver the kind of recovery it’s been promising since early 2023.
At the center of the storm? A pivot strategy built around off-price inventory, Sephora store-in-store partnerships, and real estate monetization. But so far, results are mixed.
Kohl’s stock is down 36% year to date, and more than 65% from its 2021 peak.
Current price (as of July 23): $20.12
Market cap: $2.4B
Source: Yahoo Finance – KSS
Strategy Shift or Stumble?
Kohl’s has leaned into a lower-price model, expanding inventory to include more off-price products to compete with discount retailers like TJX (TJ Maxx), Ross, and Burlington. It’s also pushed hard into beauty through its partnership with Sephora, over 900 stores now include the beauty mini-shops.
Yet recent earnings and data suggest these initiatives aren’t translating into meaningful traffic or margin growth. In Q1, comparable sales dropped 4.4%, and gross margin fell to 38.1% from 39%, as markdowns and promotional activity increased.
In a note to investors last week, JPMorgan downgraded the stock, citing “limited visibility into a successful pivot” and “execution missteps across key verticals.” UBS went further, slashing its price target from $24 to $16, warning that “Kohl’s may be structurally disadvantaged in a rapidly fragmenting retail market.”
What’s Holding Kohl’s Back?
Several factors are weighing heavily on Kohl’s performance. First, in-store foot traffic continues to trend downward, Placer.ai data shows visits fell 6.2% year over year in June. Despite the much-hyped Sephora partnership, younger consumers aren’t showing up in meaningful numbers. Gen Z and millennial shoppers remain more loyal to Ulta, Target, and digital-first beauty experiences. Meanwhile, inventory issues persist. Some locations are overstocked in apparel categories while lacking core beauty and home goods products, raising questions about merchandising strategy and supply chain execution.
Another sticking point is the company’s real estate. Activist investors like Macellum Capital have pushed for bold monetization moves, including potential sale-leasebacks, but so far, 2024 has brought little progress on this front. The lack of clarity is adding to investor frustration and weighing on sentiment heading into the back half of the year.
Analyst Sentiment Turns Bearish
Firm | Rating | Price Target | Notes |
|---|---|---|---|
JPMorgan | Neutral ↓ | $19 | Lowered from $25, citing limited upside and weak consumer data |
UBS | Sell ↓ | $16 | Sees risk of “structural decline” in Kohl’s traditional model |
Morgan Stanley | Equal-weight | $21 | Monitoring real estate activity and Sephora traction |
BofA Securities | Underperform ↓ | $18 | Concerned about weak Q2 setup and competitive threats |
What to Watch This Quarter
Kohl’s is expected to report Q2 earnings in mid-August. Analysts are forecasting another decline in same-store sales, though the company may lean on digital growth and beauty partnerships to offset broader weakness.
The Bottom Line
Kohl’s is trying to reinvent itself, but with consumer preferences changing fast, execution will be everything. Unless the company can quickly show traction on its pivot strategy, particularly through Sephora and digital growth, pressure from Wall Street and activist shareholders could intensify.
The next few months will be crucial in determining whether Kohl’s can stabilize or fade further from retail relevance.