Kohl's Earnings: Tough 2024 Leads Into Yet Another Reset Year in 2025; Shares Undervalued

Although no-moat Kohl’s fourth-quarter sales were slightly better than feared, bleak 2025 guidance caused the shares to crash to multidecade lows on March 11. The report was the company’s first under CEO Ashley Buchanan, who made it clear that much work needs to be done in terms of merchandising, promotions, and store operations before results improve. We expect to reduce our $45 fair value estimate by a high-single-digit percentage, but the shares remain very undervalued, in our view. Despite its problems, Kohl’s has strengths, including its reputation for value, partnership with Sephora (comparable sales growth of 13% in the quarter), loyalty program of more than 30 million members, substantial real estate ownership, and free cash flow generation.