We came across a bullish thesis on Kohl’s Corporation (KSS) on Substack by Hugo Navarro. In this article, we will summarize the bulls’ thesis on KSS. Kohl’s Corporation (KSS)’s share was trading at $8.95 as of March 26th. KSS’s trailing and forward P/E were 9.13 and 21.32 respectively according to Yahoo Finance.
A customer shopping in a department store, browsing through racks of clothing.
Kohl’s Corporation presents a compelling investment opportunity amid widespread market pessimism. Despite the stock trading at distressed levels and short interest nearing 50%, bankruptcy remains highly unlikely given the company’s positive cash flow, ample liquidity, and manageable debt. The recent appointment of CEO Ashley Buchanan, known for his turnaround success at Michael’s, adds further credibility to Kohl’s ability to navigate current challenges. Buchanan’s compensation structure, heavily weighted in stock, signals confidence in the company’s future, while his early actions—store closures, workforce reductions, and operational streamlining—demonstrate a disciplined approach to revitalization.
At its core, Kohl’s retains a strong free cash flow profile, averaging over $1 billion annually over the past decade. Although net sales declined 7.2% in FY 2024, the company still exceeded Wall Street expectations with adjusted EPS of $1.50. The post-earnings sell-off, driven by conservative guidance, has created an attractive entry point for investors willing to look beyond short-term volatility. The ongoing Sephora rollout will reduce capital expenditures, bolstering future free cash flow, while renewed efforts to drive comparable sales growth signal a shift toward long-term stability.
A key misperception surrounding Kohl’s is its debt. While often cited as excessive, its actual obligations amount to approximately $1.8 billion, with no major maturities until 2029. Much of the reported debt consists of lease liabilities, which, unlike traditional debt, are highly negotiable. This financial flexibility, combined with Buchanan’s proactive strategy, positions Kohl’s for an operational recovery even in adverse market conditions. The company’s extensive real estate holdings further reinforce its intrinsic value. Kohl’s owns 410 of its 1,150 locations, primarily in prime retail strip centers, representing a highly attractive asset base. Even in a conservative scenario, the real estate portfolio is valued at approximately $4 billion, with upside potential reaching $8-10 billion under favorable conditions.
Kohl’s intrinsic value ranges from $22 to $70 per share, with the higher end less probable. Trading below liquidation value with strong cash flow, an incentivized CEO, and 50% short interest, Wall Street’s pessimism is excessive. If Buchanan’s turnaround succeeds, Kohl’s presents a compelling contrarian investment with substantial upside.
Kohl’s Corporation (KSS) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held KSS at the end of the fourth quarter which was 30 in the previous quarter. While we acknowledge the risk and potential of KSS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than KSS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.