Kohl’s bets big on bargain hunters in bid to boost growth

Consumers have a tighter grip on their wallets these days, with years of elevated inflation and rising job concerns pushing shoppers to trade down and eliminate discretionary spending.

Retail heavyweights from Target to PepsiCo have responded with direct promotions aimed at winning back value-focused buyers.

Now, Kohl’s is trying its own tactic, but will it spark sustainable growth for KSS stock?

Unpacking the big plan

Kohl’s recently rolled out its new “Deal Bar” at the front of its stores, featuring gifts, essentials, and seasonal items all priced at $10 or less.

The straightforward strategy hopes to convert higher foot traffic and low-margin impulse buys into higher-margin purchases elsewhere in the store.

And it’s a high-stakes move for the company, which has seen quarterly sales dip 3.6% year over year and operates with razor-thin margins around 1.2%.

Management raised FY2025 EPS guidance to $1.25-$1.45, but long-term projections imply modest revenue decline through 2028.

Price-cut promotions can boost volume, but they could also squeeze profits even tighter. Analysts note Kohl’s earnings coverage of interest costs are already under pressure, meaning there’s little room for error when discounting takes its toll.

The bottom line? Deal Bar might help boost traffic, but the real test is whether it translates into repeat customers.

What investors are thinking

Institutional ownership is high (around 98%), suggesting big money is watching closely. But Wall Street remains cautious:

• Citigroup cut its price target to $20 with a neutral rating
• MarketBeat shows an average rating of “reduce”
• Eight analysts rate it a hold vs. six who call it a sell
• Average price targets of about $21 imply modest upside

Shares finished more than 3% lower on Monday, recovering slightly from steeper losses earlier in the day to finish above $18.

The stock is trading at about 11x earnings, which looks inexpensive but also reflects uncertainty about future growth. \

Even though recent earnings beat expectations and guidance improved slightly, analysts warn that heavy discounting could lock Kohl’s into prolonged margin pressure.

Investors and Kohl’s management must remember that cheap prices alone don’t create durable profits. Without expanded margins and stabilized sales, KSS stock’s comeback is anything but a guarantee.