Why Kohl's Remains a Dangerous Bet Despite Recent Hype

The Rally That Tells You Everything

Kohl’s stock climbed nearly 43% in a single trading day after reporting third-quarter earnings—a classic meme stock move driven more by sentiment than fundamentals. The market cheered several developments: permanent CEO appointment for Michael Bender, an improved 2025 outlook, and successful debt refinancing at better rates. Add the Sephora partnership and cost-cutting initiatives into the mix, and on the surface, the narrative seems compelling. A P/E ratio hovering just above 15 appeared to validate the timing of the rally.

Yet this is precisely where meme stock investors often get trapped. The excitement masks a deeper problem.

The Revenue Problem Nobody’s Fixing

Strip away the cost-cutting wins and the leadership optimism, and Kohl’s faces an uncomfortable truth: its sales are shrinking. Net sales declined 4% in the first nine months of 2025, landing at $9.8 billion. Even with management’s improved guidance, the company expects this downward trajectory to persist.

Yes, net income improved from $61 million to $147 million. But this improvement came entirely from expense reduction, not from selling more. There’s a ceiling to how far cost-cutting can carry a company. Eventually, revenue growth becomes non-negotiable for sustained profitability.

The Missing Moat

Here’s what separates genuine investment opportunities from meme stock traps: sustainable competitive advantage. Kohl’s has none. Everything it offers—apparel, home goods, accessories—is available at competitors down the street or online. The Sephora partnership is a nice addition, but it doesn’t fundamentally change the value proposition. A consumer choosing between Kohl’s and Target isn’t choosing based on unique products; they’re choosing based on convenience or price.

In a market this crowded and commoditized, Kohl’s simply isn’t irreplaceable. If it disappeared tomorrow, customers wouldn’t struggle to find alternatives.

Why This Matters for Your Portfolio

Investors chasing meme stock ETFs or individual meme stocks often operate on a simple logic: buy the hype, exit before it fades. It’s speculation, not investing. Kohl’s recent rally showcases this dynamic perfectly. New CEO, partnership news, improved guidance—these trigger social media buzz and retail interest, pushing up the stock price. But none of these changes address the core problem: declining revenue in an ultra-competitive retail environment.

The company may stabilize its profits through operational efficiency, but without a credible plan to grow top-line sales, the stock is vulnerable the moment investor sentiment shifts. And it will shift.

The Bottom Line

Kohl’s might feel like a redemption story—a struggling retailer finding its footing again. But closer inspection reveals it’s really a slow decline masked by short-term cost management. The recent 43% rally was driven by hope and meme stock momentum, not by any fundamental transformation.

Unless Kohl’s can develop a genuine competitive edge and reverse revenue declines, it belongs on the avoid list. The exciting narrative will eventually give way to disappointing reality, and retail investors who chased the hype will be left holding the bag.