Why Is Kohl's (KSS) Stock Soaring Today

What Happened:

Shares of department store chain Kohl’s (NYSE:KSS) jumped 7.1% in the after-market session after the company reported second quarter earnings results. Kohl's blew past analysts' EPS expectations. Sales also exceeded expectations amidst a challenging demand environment as customers exhibited more discretion in their spending. Looking ahead, its full-year earnings guidance topped Street's estimates. Reassuringly, the company observed strong performance in key growth areas, including Sephora, home decor, gifting, and impulse. Zooming out, we think this was a solid quarter. After the initial pop the shares cooled down to $19.54, down 0.4% from previous close.

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What is the market telling us:

Kohl's’s shares are quite volatile and over the last year have had 30 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 27.9% on the news that the company reported first quarter results that missed significantly on same-store sales, leading to an EPS miss. Precisely, net sales decreased 5.3% and comparable sales fell 4.4%. The weakness was mostly driven by a significant decline in clearance sales, which negatively impacted overall comparable sales by more than 6%. 

Looking ahead, the company lowered its full year outlook across the board. Management attributed the conservative guidance to the Q1 underperformance and the ongoing uncertainty in the consumer environment. Despite these challenges, Kohl's highlighted some positive aspects of its performance, including improved gross expansion (highlighting success with its improved pricing strategy), inventory reduction, and continued strong growth in Sephora. 

Overall, this was a bad quarter for Kohl's given the weak performance and poor guidance.

Kohl's is down 30.4% since the beginning of the year, and at $19.54 per share it is trading 33.4% below its 52-week high of $29.36 from December 2023. Investors who bought $1,000 worth of Kohl's’s shares 5 years ago would now be looking at an investment worth $422.49.

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