Kohl's 43% Stock Surge Obliterates Shorts: Can Margin Gains Defy Retail Gloom?
Kohl’s Corp (NYSE:KSS) just delivered the kind of shock that forces traders to reach for the oxygen mask. KSS shares exploded more than 42% on Tuesday after the company flipped expectations with a surprise third quarter profit and raised full-year guidance, lighting up one of the market's most crowded short positions.
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With roughly 37% of the float shorted going into earnings, the result was a pure squeeze — violent, fast, and fueled by panic buying rather than calm conviction.
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Kohl’s Margin Muscle Finally Shows Up
What made Wall Street sit up wasn't the revenue line, but the gross margin jump. Kohl's expanded margins by more than 100% year over year, driven by cost discipline, inventory efficiency, and a cleaner merchandising mix.
For a retailer that has spent years bleeding under e-commerce pressure and legacy store weight, the scale of the margin turnaround looks more like structural change than lucky timing. New CEO Michael Bender framed the strategy as the beginning of a multi-year productivity reset heading into 2025 — focusing on category profitability, vendor negotiations, and a tighter store footprint rather than chasing traffic at any cost.
A raised outlook signaled internal confidence, and in a market starved for real operating improvements rather than promotional storytelling, that was enough to ignite an avalanche.
The headwinds did not vanish
The bullish celebration comes with a hard question: is this sustainable or a one-day adrenaline spike?
Comparable sales still declined nearly 2%, reinforcing that revenue hasn't turned yet. Kohl's also faces roughly $400 million in capex demands to modernize stores and logistics. With consumer discretionary spending wobbling under rate and employment uncertainty, the climb gets steeper from here.
Valuation vs. reality check
The stock now trades near 0.8x sales, cheaper than Macy's Inc (NYSE:M) even after the rally, which fuels the argument that Kohl's is still undervalued if margins stabilize. The bear side says the rally was mechanical, not fundamental, and that squeezing shorts is not the same as winning customers.
Investors won't need to wait long to know which camp is right. If margins keep expanding into the holiday quarter without traffic collapsing, this may have been the moment Kohl's reset its story — not just its stock chart. If not, the squeeze high could prove the peak.
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