Kohl’s (KSS) is in a tough spot right now, dealing with falling sales, weak profits, and a 75% cut to its dividend for 2025. The company’s troubles reflect wider issues in retail, like sticky inflation, changing consumer habits, and tough competition. Kohl’s saw its net sales drop by 7.2% in 2024, and its profits fell sharply by 65%.
This decline matches what’s happening across the retail sector. Even though U.S. retail sales grew 3.6% in 2024 to hit a record $5.28 trillion, most of that growth came from online shopping and holiday spending rather than traditional department stores like Kohl’s.
Over the past year, Kohl’s stock has plunged more than 65%. Despite efforts to bounce back, like expanding its Sephora partnership, the core business is still struggling.
Now, as Kohl’s heads into 2025 with new CEO Ashley Buchanan at the helm, there’s a lot riding on his ability to turn things around.
Let’s dive deeper and see if Buchanan can steer Kohl’s out of this slump or if the company will stay stuck on what analysts call “a rollercoaster that only seems to dip downward.”
Dissecting Kohl’s Financial Struggles
Kohl's (KSS) operates a unique retail model that combines over 1,100 physical stores with a strong online presence, catering to both traditional and tech-savvy shoppers. Known for its loyalty program and partnerships with popular brands, Kohl’s has long been a go-to spot for affordable clothing, home goods, and accessories. However, its recent financial struggles have raised questions about how well this model is working.
The stock’s performance has been really rough. Over the past year, Kohl's shares have dropped by a whopping 67%. So far in 2025, the stock has continued to fall, dropping 41%.
The company's decision to cut its quarterly dividend by 75% shows just how serious its challenges are. This move is meant to save cash and reduce debt, following weak results for Q4 and 2024. In the fourth quarter, net sales fell by 9.4% to $5.2 billion, while comparable sales dropped 6.7%. For the year, net sales were down 7.2%, with comparable sales down 6.5%.
Earnings per share took a big hit, with adjusted earnings of $0.95 down significantly from $1.67. Operating income fell to $126 million from $299 million the year before, and inventory rose slightly to $2.9 billion. After its Q4 earnings report and disappointing guidance for fiscal year 2025, shares plummeted by more than 24% in one day, reflecting investor concerns.
Analysts have been harsh about Kohl’s performance. Oliver Chen from TD Cowen noted that Kohl’s has a long way to go to fix its product offerings, store experience, and overall value proposition. Buchanan himself admitted that many of Kohl’s problems are “self-inflicted,” pointing to overly complicated promotions and neglect of key product categories as major issues.
Despite these struggles, Kohl’s valuation offer an interesting perspective. The stock trades at a forward P/E of 8.33x, significantly lower than the sector average of 15.06x, suggesting it might be undervalued. However, its high volatility, with a beta of 1.92x, makes it a risky investment in an already uncertain retail environment.
Evaluating Kohl’s Fundamentals
Kohl’s new CEO, Ashley Buchanan, is banking on the company’s solid foundation to turn things around. With over 1,100 stores across the country and a customer base of 60 million, 30 million of whom are loyalty members, there’s potential to build on existing strengths. Buchanan’s plan focuses on three main areas: improving product selection, creating better value for customers, and making shopping easier both in-store and online. He’s also emphasizing private label brands like Sonoma and Flex, along with the successful Sephora partnership, which continues to attract new customers and drive sales growth.
Still, the company’s decision to slash its quarterly dividend by 75%, from $0.50 to $0.125 per share, raises concerns. This cut is meant to save cash and reduce debt but signals that Kohl’s is prioritizing survival over rewarding shareholders.
The dividend now has a forward yield of 6.1%, with a payout ratio of nearly 90%, which doesn’t leave much wiggle room. Compared to the retail sector’s average yield of 1.89%, Kohl’s high yield highlights risk rather than stability.
Kohl’s outlook for 2025 paints a tough picture. The company expects its net sales to drop by 5% to 7% and comparable sales to fall by 4% to 6%. Earnings per share are projected to be between $0.10 and $0.60. These numbers show just how hard it will be for Kohl’s to get back on track, especially with consumer demand weakening and operational issues lingering.
While Buchanan’s strategy offers hope for a turnaround, these fundamentals suggest Kohl’s is in a tough spot. The dividend cut and weak financial outlook for 2025 make it clear that regaining investor trust will take time and results.
What Lies Ahead for KSS
Analysts are clearly uncertain about Kohl’s future. Analysts have a consensus rating of “Moderate Sel” and the average price target is $13.02 suggests potential upside of about 60% from its current price.
The Bottom Line
With a bleak 2025 outlook and a “Moderate Sell” consensus from analysts, the path forward looks challenging. Despite CEO Ashley Buchanan’s ambitious turnaround plan, the company faces significant hurdles in regaining traction in a competitive retail landscape. For now, Kohl’s stock seems more suited to cautious investors willing to ride out the uncertainty rather than those seeking immediate returns.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
