KSS

We rate KOHLS Corp (KSS) as a Hold with a composite score of 52.7/100 at a current price of $17.72. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in momentum (79th percentile) and value (70th percentile), which together account for the majority of the composite score. Offsetting weakness in stability (20th percentile) and investment (33th percentile) tempers our overall conviction. We assign a No Moat rating (23/100), Very High uncertainty, and Poor capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends; balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

KOHLS Corp holds a top-quartile position (#0 of 50) within the Retail Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 52.7/100 places it at rank #1579 in our full 7,333-stock universe. At $1.8B in market capitalization, KOHLS Corp is a small-cap player in the Retail Trade space, which limits certain scale advantages but may allow for more agile strategic execution.

Despite positive momentum (79th percentile), revenue contraction of -4% creates a divergence between price action and fundamental trajectory. This divergence suggests either that the market is looking through near-term weakness or that technical factors are temporarily inflating the stock. Investors should assess whether the revenue decline reflects cyclical weakness or structural challenges.

The margin cascade tells an important story: gross margins of 43% (+6.9pp vs sector) narrow to operating margins of 3% (-0.5pp vs sector) and net margins of 0.9%, yielding a gross-to-net conversion rate of 2%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $17.72, KOHLS Corp appears undervalued relative to its fundamentals. Our value factor score of 70/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 16.1x (a 25% discount to the sector median of 21.4x), EV/EBITDA of 1.8x (discounted to peers), P/B of 0.5x, P/S of 0.2x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Very High uncertainty rating to KOHLS Corp. The stock exhibits multiple compounding risk factors: elevated market sensitivity (beta of 2.07), significant leverage (260% debt-to-equity), below-average price stability (20th percentile). The extreme uncertainty around future cash flows makes precise valuation difficult, and the range of outcomes is exceptionally wide. Only investors with high risk tolerance and extended time horizons should consider this name.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 2.07); significant leverage (260% debt-to-equity); below-average price stability (20th percentile); the combination of leverage (260% D/E) and thin margins (0.9% net) amplifies downside risk. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 20th percentile and quality factor at the 44th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 43% provide a buffer against cost pressures; a 5.38% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate KOHLS Corp's capital allocation as Poor. Key concerns include low returns on equity (3.3%), elevated leverage (260% D/E), weak asset returns (ROA 0.9%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — KOHLS Corp significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, KOHLS Corp receives a Hold rating with a composite score of 52.7/100 (rank #1579 of 7,333). Our quantitative framework assigns a No Moat (23/100, trend: stable), Very High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 49/100.

Our analysis supports a neutral stance on KOHLS Corp. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.