Kohl's stock soars 37%, joining Opendoor as the latest retail meme craze

Kohl's (KSS) shares surged over 37% on Tuesday, and more than 100% in premarket trading, becoming the latest 'meme stock' target for retail traders, particularly on WallStreetBets. This significant rally is attributed to the retailer's high short interest, which stands at 49% of its float, positioning it for a potential short squeeze despite a history of underperformance, including recent same-store sales declines and leadership changes.

Analysis

Kohl's (KSS) has become the latest target of a retail-driven speculative rally, with its stock surging 37.7% on Tuesday after rising over 100% in premarket trading, prompting a volatility halt. This price action is disconnected from the company's underlying fundamentals and is instead fueled by its status as a heavily shorted stock, with a short float of 49%. Retail traders, particularly on forums like wallstreetbets, are attempting to engineer a short squeeze, similar to the recent activity in Opendoor (OPEN), which has a 21% short float and saw its own rally quickly reverse. The speculative fervor contrasts sharply with Kohl's deteriorating operational performance. The company reported a 4.1% decline in same-store sales for Q1 2025 and projects a further drop of 4% to 6% for the full fiscal year. This poor performance is compounded by leadership instability, following the removal of its CEO in May for an ethical breach after just five months, leaving the company under an interim chief.

Key Decisions for Investors

• Investors should treat KSS as a highly speculative, short-term trade driven by market sentiment, not fundamentals, and must be prepared for extreme volatility and potential rapid reversals, as seen with Opendoor's 10.3% drop following its surge.
• Fundamental-based investors should remain cautious, as the company's negative same-store sales guidance for fiscal 2025 and recent abrupt leadership change present significant headwinds that the current stock price does not reflect.
• Traders with short positions face acute risk of a continued squeeze given the 49% short interest and should re-evaluate their positions, as the cost to maintain the short can be substantial and the stock can remain irrational longer than they can remain solvent.