We have initiated a position in $KSS, and as a standard disclaimer are noting that nothing written below represents investment advice. Please consult your fiduciary prior to making any investment decisions.
We believe Kohl’s Corporation ($KSS) is a good short- to medium-term long (~6 mo-1 yr). With short interest exceeding 40%, any materially positive news is likely to drive a squeeze on the stock. We believe activist involvement in the name will resurface, and view this as the primary catalyst.
Kohl’s Corporation ($KSS) is a major U.S. retailer operating over 1,100 stores and an online platform, primarily selling apparel, footwear, and home products. The company has been facing declining sales, with FY24 net sales down 7.2% to $15.39 billion. This decline, coupled with competitive pressures from e-commerce and other retailers, has prompted the company to undertake financial restructuring to improve its balance sheet and ensure long-term sustainability/liquidity. A messy 2022 sale process—where private equity bidders walked away—further soured sentiment.
Kohl's is priced as a dying retailer despite its resilient cash flows, real estate assets, and ongoing turnaround efforts. The valuation is compelling, trading at ~7x NTM EBITDA. It has a net asset value of ~$3.8 billion, compared to a market cap of ~$900 million.