Kohl’s Corporation (KSS): A Bull Case Theory 

We came across a bullish thesis on Kohl’s Corporation on Cundill Deep Value’s Substack by FRAGMENTS. In this article, we will summarize the bulls’ thesis on KSS. Kohl’s Corporation’s share was trading at $24.71 as of December 2nd. KSS’s trailing and forward P/E were 13.95 and 31.55 respectively according to Yahoo Finance.

Kohl’s Corporation is undergoing a disciplined margin-repair phase, anchored by three underappreciated earnings engines—category mix, credit-card royalties, and hard-asset monetization. The mix story is central: Sephora at Kohl’s surpassed $1.4 billion in 2023 and is projected to exceed $2 billion by 2025, while Babies“R”Us shop-in-shops, rolling out across roughly 200 stores by late 2024, are expected to drive registry behavior, repeat trips, and higher ticket sizes.

Complementing this is the company’s royalty-like credit-card partnership with Capital One, amended in 2022 and running through 2030, which stabilizes “other revenue” and provides resilience across cycles. The third engine—selective monetization of owned assets such as distribution centers and out-parcels—can strategically reduce interest expense through ground leases or limited DC sales without inflating occupancy costs via broad sale-leasebacks.

Operationally, Kohl’s has demonstrated credible progress. FY-2024 net sales reached $15.4 billion with gross margin up 50 bps to 37.2%. In Q2-FY25, despite comps down 4.2%, gross margin expanded to ~39.9%, inventory declined 5% y/y, and adjusted EPS was $0.56, prompting a guidance raise. The board’s May 2025 CEO transition underscored accountability, placing execution on quarterly scrutiny—gross margin and net interest are now the decision metrics.

Sustained gross margin above 37.5% and net interest below $300 million could re-rate the multiple, while slippage would keep the stock range-bound. With beauty and baby categories driving higher-margin traffic, a stable credit-card royalty stream, and measured asset monetization to reduce funding costs, Kohl’s offers asymmetric upside within a margin-credibility retail trade.

Previously we covered a bullish thesis on Kohl’s Corporation (KSS) by Hugo Navarro in March 2025, which highlighted the company’s turnaround potential under CEO Ashley Buchanan, strong cash flow, and undervalued real estate. The stock has appreciated approximately 176% since our coverage as the recovery thesis played out. The thesis still stands as margin repair continues. FRAGMENTS shares a similar view but emphasizes margin credibility and capital discipline.

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Disclosure: None.