Initiated 2026-10-27 · Price $23.65 (as of 2026-10-26 close, stockanalysis) · Mkt cap $2.68bn (113.38mm shares outstanding; $2.79bn on 118.0mm diluted) · Consumer discretionary / department stores · Model: verified

Rating: Hold — Conviction: Low

Kohl's has stopped shrinking as fast. Comps were −0.9% in Q2 against −3.1% for FY2025, inventory is down 3%, and net senior debt has fallen to ~$0.5bn. The stock is up ~44% in a year and now sits on the model's Base case, which already assumes sales stabilize near −1% a year after five years of ~5.5% annual decline. Value is spread extremely wide on either side of that case because the equity is a thin stub under $3.7bn of notes and finance leases, so we see no edge in either direction until comps actually turn positive.

Conviction tests (3a-v-c): T1 fail (Hold → Sell at +1pp: Base midpoint −13.3% with the Bear case at ~$0; −1pp gives +17.3%, still Hold) · T2 pass (Gordon DCF alone +11.1%, exit DCF alone −9.7%: both read Hold) · T3 pass · T4 pass (no pending deal, ruling or contract event; the remaining ~$35mm of IEEPA refund claims is ~$0.30/share)

Model value range vs price
Bear $0.83Base $23.82Bull $53.76Price $23.65

Business overview

Kohl's runs 1,151 mid-priced department stores in 49 states, mostly off-mall, plus Kohls.com (digital is ~26% of net sales). FY2025 total revenue was $15.5bn. That is $14.8bn of net sales (women's 24%, accessories including Sephora 21%, men's 20%, home 15%, children's 12%, footwear 8%) plus $0.75bn of other revenue, mainly its share of the Capital One–owned Kohl's credit-card portfolio. Sephora shop-in-shops are in 1,100+ stores and carry the only growing category. Three variables drive earnings: (1) comps, mainly transaction count in apparel; (2) gross margin, set by proprietary-brand mix, promotions and tariffs on Asia-sourced goods; (3) fixed-cost leverage on store payroll and occupancy, where small sales moves swing a ~3.5–4% operating margin.

Competition

Off-price is where the share goes. TJX comps rose 4% in its quarter to 2026-08-01 (Marmaxx US +1%, HomeGoods +7%). Macy's comps rose 2.7% in its Q2 (Macy's banner +1.1%, Bloomingdale's +11.3%; reported 2026-09-10). Kohl's comps fell 0.9% over the same quarter. Kohl's is still the laggard, even if the gap with the Macy's banner has narrowed to ~2pp. The pressure shows up first in traffic (FY2025 transactions were down ~4%) and then in promotions. On the same lease-inclusive stockanalysis basis, the closest comparable, Macy's, trades at 7.1x TTM EV/EBITDA against Kohl's 6.9x. Dillard's trades at 11.3x and the off-pricers at 19–21x.

Bull case

  1. Comps turn positive — proprietary brands comped +3% in Q2. A new chief merchant joined from Walmart (effective 2026-09-28). Choice counts are being cut by mid-teens, and footwear improved ~500bp from Q1. Together these take comps to +1–2% from FY2027. Plays out if the middle-income consumer holds up and holiday FY2026 is positive. Model: rev_growth, terminal_growth
  2. Margin rebuild — proprietary brands carry higher gross margin, inventory is lean, and SG&A fell 1.3% in H1. EBITDA margin recovers past FY2023's 8.4% toward ~8.9%. Plays out if positive comps return operating leverage on the fixed store base. Model: ebitda_margin
  3. Re-rating from a distressed multiple — 4.7x EBITDA on the model's basis (excluding operating leases) prices continued decline. Stabilization would justify a Macy's-like multiple. Plays out if two or more quarters of positive comps arrive. Model: exit_ev_ebitda

Bear case

  1. Share loss resumes — total revenue has fallen from $19.4bn (FY2021) to $15.5bn (FY2025). Off-price and Amazon keep taking the apparel trip, and comps go back to −3% to −4%. Plays out if Q2's improvement proves to be easy comparisons and the merchandising reset misses. Model: rev_growth, terminal_growth
  2. Margin deleverage — FY2026 margins include ~$100mm of one-off IEEPA refunds (~$0.85/share pre-tax, 3.6% of market cap). On falling sales, fixed costs take EBITDA margin toward 5.5%. Other revenue is also shrinking, down $84mm in FY2025 and 4.4% in H1 FY2026, as credit-card sales fall. Model: ebitda_margin
  3. Leverage magnifies everything — debt is 57% of capital at market weights, including $2.39bn of finance leases and financing obligations. The ratings are B2/B+/BB- (Fitch outlook negative), and the 2031 notes already carry a 175bp step-up. Refinancing the 2029–31 notes at B-rated yields lifts the cost of capital and caps the multiple. Model: wacc, exit_ev_ebitda

Valuation & balance sheet

Metric (definition) Current Own history (range or 5y avg) Peers Source, as-of
EV/EBITDA, model basis (mkt cap on diluted shares − cash + notes + finance leases; excl. operating leases) 4.7x FY2025 adj. EBITDA $1,210mm; 4.4x LTM $1,293mm n/a (unverified) not computed on this basis EDGAR, Q2 10-Q, 2026-08-01; price 2026-10-26
EV/EBITDA TTM (stockanalysis, lease-inclusive) 6.9x n/a (unverified) M 7.1x · DDS 11.3x · TJX 18.7x · ROST 20.6x stockanalysis, 2026-10-26
P/E forward (stockanalysis consensus) 15.7x (TTM 10.2x, refund- and settlement-flattered) 52-week price change +44% M 11.1x · DDS 19.4x · TJX 26.5x · ROST 27.4x stockanalysis, 2026-10-26
P/B 0.64x n/a (unverified) M 1.25x · DDS 4.94x · TJX 14.9x · ROST 11.1x stockanalysis, 2026-10-26

Model-implied value range (from model-summary.json; generic module, Gordon-growth DCF and exit-EV/EBITDA DCF, midpoints): Bear $0.83 · Base $23.82 · Bull $53.76 per share, i.e. implied returns of −96.5% / +0.7% / +127.3% vs $23.65. These ranges show how the bull and bear drivers translate into value; they are not price targets. The price sits on Base, so the market is paying for guided FY2026 and a slow −1% drift after that. Neither the stabilization nor the resumption of decline is priced. The Base 4.5x exit is a 4% de-rating from today's 4.7x on FY2025 EBITDA. The two methods differ by 23%: Gordon gives $26.28 and exit $21.35, so the Gordon method embeds a higher terminal multiple than 4.5x, even at −1% perpetual growth. Bear is near zero because a 3.5x exit on 5.5% margins barely covers $2.9bn of net debt and finance leases. A tail run, needed because a single banner is 100% of revenue, used revenue −2%/−5%/−5%/−5%/−5%, margin down to 4.8%, a 3.0x exit, 11% WACC and −4% terminal growth. It gives $0.00 (−100%, equity floored), so the bear and tail differ in degree of shortfall, not in the printed figure. Base FY2026 EPS is $2.17 against the $1.80–2.40 adjusted guide (midpoint $2.10, within 5%).

Balance sheet: net leverage 2.4x FY0 EBITDA (notes $1,342mm + finance leases $2,387mm − cash $821mm), coverage 5.7x, liquidity $821mm cash plus an undrawn $1.5bn ABL (subject to borrowing base), nearest material maturity $360mm 10% secured notes in 2030 ($42mm in 2029), ratings Moody's B2 (positive) / S&P B+ (stable) / Fitch BB- (negative).

Model note: Built and verified (LibreOffice recalculation matched all 3,207 formula cells). Unverified inputs: none. Assumptions without basis: none. No scenario consistency CHECKs. Base WACC 8.7% includes a stated +0.65pp premium over the 8.05% CAPM/market-weight arithmetic, because debt is at book value and the equity is a thin stub. The finance-lease coupon (~5%) and 2040 maturity are estimates for an amortizing lease book. cost_of_debt (8.5%) is calibrated to net interest on net debt, not to coupons. FY0 cash and debt are at 2026-08-01, with the NWC level offset by H1 model-basis FCF of $407.8mm.

Relative value vs peers
MetricKSSMDDSTJXROSTPeer medianvs median
P/E (TTM)10.2x8.6x15.4x26.6x28.3x21.0x−52%
P/E (forward)15.7x11.1x19.4x26.5x27.4x23.0x−31%
PEGn/an/an/a2.7x2.0x2.3x
EV/EBITDA (TTM)6.9x7.1x11.3x18.7x20.6x15.0x−54%
EV/Sales (TTM)0.5x0.4x1.5x2.7x3.1x2.1x−74%
P/B0.6x1.2x4.9x14.9x11.1x8.0x−92%
FCF yield (TTM)38.6%22.9%6.1%3.7%3.7%4.9%+33.7pp
Dividend yield2.1%3.2%4.7%1.3%0.8%2.3%−0.2pp
P/E (TTM)ROST28.3xTJX26.6xDDS15.4xKSS10.2xM8.6x
P/E (forward)ROST27.4xTJX26.5xDDS19.4xKSS15.7xM11.1x
PEGTJX2.7xROST2.0x
EV/EBITDA (TTM)ROST20.6xTJX18.7xDDS11.3xM7.1xKSS6.9x
EV/Sales (TTM)ROST3.1xTJX2.7xDDS1.5xKSS0.5xM0.4x
P/BTJX14.9xROST11.1xDDS4.9xM1.2xKSS0.6x
FCF yield (TTM)KSS38.6%M22.9%DDS6.1%ROST3.7%TJX3.7%
Dividend yieldDDS4.7%M3.2%KSS2.1%TJX1.3%ROST0.8%

As of 2026-10-27. One source and one definition for every company: TTM multiples, forward P/E on stockanalysis consensus, EV/EBITDA and EV/Sales on stockanalysis EV (lease-inclusive: KSS total debt $6.42bn includes operating leases) and TTM EBITDA. Not the model's own EV basis. Quotes are the 2026-10-26 4:00 PM ET close, fetched 2026-10-27. Dashed line = peer median. Source: stockanalysis.com /stocks/<ticker>/statistics/, fetched 2026-10-27.

Notes. The source shows no PEG for KSS, M or DDS (no credible multi-year growth estimate); TJX and ROST PEGs are the source's own, resting on its analyst growth estimates. KSS TTM earnings include ~$100mm of one-off IEEPA tariff refunds recognized in Q2 FY2026 COGS; the forward P/E sits above the TTM for KSS, M and DDS because consensus expects lower earnings. KSS TTM FCF (~$1.03bn) is flattered by working-capital timing (payables up $284mm y/y at Q2) and tariff refunds; FY2025 OCF less capex was $1,008mm.

Scenario stress test

Reasoned from the bull/bear drivers above. The model column comes from the scenario overlays (Base case + shock).

Scenario Effect Mechanism Magnitude Model Δ value vs Base ($/sh)
S1 Fast equity crash − High-beta (1.35), ~28%-shorted equity stub de-rates; no operating channel Med −$2.42
S2 Slow bear / recession − Middle-income discretionary apparel: comps, fixed-cost deleverage, markdowns, credit-card write-offs. Milder than Base − Bear ($22.99) on purpose: a two-year dip, not permanent share loss High −$8.01
S3 Rapid rate shock − Discount rate on a 57%-debt structure; dearer refinancing of 2029–31 notes Med −$4.95
S4 Slow rate grind − Same channel, slower Med −$2.58
S5 Soft-landing cuts + Lower rates plus an intact consumer lift a levered, rate-sensitive equity Med +$4.10
S6 Recession-driven cuts − Rate relief swamped by weaker discretionary spend Low −$1.19
S7a Credit liquidity shock − B-rated issuer de-rates with spreads; ABL undrawn, no near maturity Med −$2.42
S7b Slow default cycle − Credit-card profit share falls with write-offs; refinancing costs rise Med −$2.84
S8 Stagflation − Imported-apparel, freight and wage inflation; promotions limit pass-through Med −$4.72
S9a Dollar spike + Cheaper Asia-sourced merchandise; no foreign sales Low +$0.47
S9b Dollar slide − Mirror of S9a Low −$0.47
S10 Melt-up + High-beta, high-short-interest value stock re-rates Low +$1.81
S11 Energy supply shock − Freight/fuel costs; gasoline squeezes middle-income spend Low −$1.97
S12 Mega-cap/AI derating + Rotation into cheap domestic value without recession Low +$0.91

Currently active/on watch per the playbook: S3 partially active (10Y 5.00% price leg met, pace legs short); S8, S10, S11 on watch.

Model value change vs Base, by scenario
S2 Slow bear / recession−$8.01S3 Rapid rate shock−$4.95S8 Stagflation−$4.72S7b Slow default cycle−$2.84S4 Slow rate grind−$2.58S1 Fast equity crash−$2.42S7a Credit liquidity shock−$2.42S11 Energy supply shock−$1.97S6 Recession-driven cuts−$1.19S9b Dollar slide−$0.47S9a Dollar spike+$0.47S12 Mega-cap/AI derating+$0.91S10 Melt-up+$1.81S5 Soft-landing cuts+$4.10

What would change the call

Upgrades if: comps turn positive for two consecutive quarters with gross margin ex-refunds flat or up, and holiday FY2026 operating margin lands at the top of the 3.5–4.0% guide. Downgrades if: Q3 or Q4 comps fall back below −2%, FY2026 guidance is cut, or another rating downgrade triggers further coupon step-ups.

Watch items

Sources