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Mirroring the move following last quarter's results, Kohl's (KSS -20%) is selling off to fresh multi-year lows today despite delivering a sizeable bottom-line beat in Q4 (Jan). Market participants are disgruntled today by the department store chain's gloomy FY26 earnings, revenue, and same-store sales growth forecasts, anticipating comps to drop by 4-6%, extending the company's woes following a -6.5% decline in FY25.

While the big earnings beat in the quarter was encouraging, it was completely erased by KSS's dismal FY26 earnings outlook, predicting $0.10-0.60, less than half of the $1.50 it registered in FY25 despite the company reportedly cutting 10% of its corporate workforce in late January. Meanwhile, revs of $14.32-14.63 bln translates to a 6% drop yr/yr at the midpoint, similar to the 7% decline recorded in FY25. To make matters worse, KSS also sliced its dividend by 75%. CEO Ashley Buchanan, who took over from Tom Kingsbury on January 15, wanted to ground expectations surrounding the company's turnaround plan, which he noted would take time.

• KSS's comeback centers on three main pillars. The first two items revolve around offering a more balanced assortment and reestablishing the banner as a leader in quality. These moves resemble what Macy's (M) has been doing with its First 50 stores, which attempt to cater more to consumer demand. Macy's First 50 has been performing well, consistently outpacing non-50 comp growth, signaling to KSS that implementing certain enhancements can rekindle consumer demand.
  • KSS is rebalancing its assortment to work toward these goals, building on familiar brands like Sonoma and Flex. KSS will still offer its national brands but cut back on its list of exclusives and coupons, pointing to the percentage of sales from coupons reaching an all-time high in 2024. KSS is starting to reverse these coupon exclusions to simplify the shopping experience while also reducing the complexity of its offers to provide better clarity over price and value.
• The third component of KSS's turnaround is enhancing its omnichannel platform. Consumers have expressed frustration over the lack of consistency regarding inventory. Management mentioned that it will be managing inventory tightly but looking to restore trip assurance through greater supply chain agility. Accompanying this move will be an optimized store layout.
• CEO Ashely Buchanan believes the actions the company is undertaking in 2025 are steps in the right direction but acknowledges that more moves are still required to unlock KSS's full potential. Mr. Buchanan noted that more details would follow on additional initiatives throughout the year.

After an earnings miss and slashed guidance last quarter, investors were skeptical the incoming CEO Ashley Buchanan could reinvigorate the Kohl's banner, keeping selling pressure active as shares steadily sunk to new 52-week lows throughout the months since. KSS's underwhelming FY26 guidance highlights the work cut out for Mr. Buchanan. While KSS has thus far managed to avoid a takeover, given its ongoing struggles, going private is not entirely off the table, especially following last week's news of Walgreens Boots Alliance (WBA) being purchased by a private fund. As such, plenty of uncertainty surrounds the future of KSS, not helping fuel a convincing rally soon.