Kohl’s Earnings: Tough 2024 Leads Into Yet Another Reset in 2025

Key Morningstar Metrics for Kohl’s

• Fair Value Estimate: $45.00
• Morningstar Rating: ★★★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Kohl’s Earnings

Although Kohl’s KSS fourth-quarter sales were slightly better than feared, bleak 2025 guidance caused the shares to crash to multidecade lows on March 11. The report was the company’s first under CEO Ashley Buchanan, who made it clear that much work needs to be done in merchandising, promotions, and store operations before results improve. We expect to reduce our fair value estimate of $45 per share by a high-single-digit percentage, but the stock remains very undervalued, in our view.

Despite its problems, Kohl’s has strengths, including its reputation for value, partnership with Sephora (comparable sales growth of 13% in the quarter), loyalty program of more than 30 million members, substantial real estate ownership, and free cash flow generation.

Kohl’s comparable sales fell 6.7% in the quarter, a bit better than our forecast for a 7.8% drop. As has been the case for years, Kohl’s struggled to find the right promotional strategies and mix of private-label and national brands. It has also seemingly driven away some core customers by taking out merchandise, including jewelry and some women’s apparel, to make room for Sephora. Buchanan is tackling these problems, but Kohl’s expects a 2025 same-store decline of 4%-6% against an easy comparison, so a turnaround is not imminent.

The results included one-time costs totaling $76 million, related to the previously announced closure of 27 stores. Excluding this charge, operating margin would have been close to our 3.7% estimate, as gross margin improvement offset selling, general, and administrative expenses 2.5% above our forecast.

Quarterly adjusted earnings per share of $0.95 beat our $0.78 estimate. Full-year adjusted EPS fell to $1.50 from $2.85 in 2023, and 2025 guidance is for a further decline to only $0.10-$0.60. Kohl’s has done a fair job of cutting operating expenses, which were down nearly 4% in 2024, but realistically, it must get back to 1%-2% comparable sales growth to drive higher net income.