Will Kohl's Close More of Its Brick-and-Mortar Stores in 2026?

Kohl's reported Q4 2025 adjusted EPS of $1.07 (beat $0.86) but net sales of $4.97B missed the $5.02B consensus and comparable sales fell 2.8% YoY; management now guides for net sales to decline ~2% in 2026, marking a fifth consecutive year of same-store sales declines. Management has ruled out near-term store closures, saying it will focus on optimizing its ~1,150 physical locations ("well over 90%" profitable) and e-commerce (35% of Q4 sales) instead. Shares have given back most of their 2025 gains (from under $8.50 to $25 then down to ~ $12), and the stock may need stabilized or improving sales before it re-rates despite trading at under 9x forward earnings.

Analysis

Management’s decision to pause additional closures converts Kohl’s remaining store base into a dual-purpose asset: retail showrooming plus local fulfillment nodes. That increases the need for tighter inventory cadence, micro-fulfillment tooling, and near-real-time demand forecasting — a shift that disproportionately benefits vendors of GPU/accelerator compute, edge-inventory software and last-mile orchestration rather than traditional capital-intensive logistics players.

Near-term market drivers are clear and binary: sequential same-store sales prints and inventory turn improvements will move sentiment quickly, while any missed comp or rising markdown rate will amplify downside because leases and fixed-store opex are sticky. Tail risks include a sharper-than-expected consumer credit deterioration or an aggressive promotional spiral that forces margin-negative clearing; catalysts that would reverse the trend are stabilization in comps over two consecutive quarters or demonstrable reductions in working capital drag.

Consensus is tilted toward a near-term earnings/footprint scare, but that may overstate permanent demand loss given store optionality (fulfillment, returns, localized promotions) and renegotiation levers on leases. The cleaner trade is to separate operational exposure (same-store demand) from structural optionality (real estate + omni-inventory tech adoption) and take asymmetric positions that hedge headline retail risk while owning the technology beneficiaries of a retailer optimizing existing stores.

Key Decisions for Investors

• Short KSS via a defined-risk 3–6 month put spread (sell nearer-term OTM put, buy deeper OTM put) sized at 1–2% portfolio — thesis: comps stay soft and sentiment reverts; target profit 25–40% on the spread if KSS prints another weak comp; stop-loss: close if two successive quarters show sequential SSS improvement.
• Pair trade: equal-dollar short KSS / long TJX or ROST for 3–9 months — captures share shift to off-price/resale if Kohl’s continues promotional pressure. Expect asymmetric payoff (~15–30% within 6–9 months) with sector-neutral exposure to apparel trends; trim if CPI-driven discretionary spend stabilizes.
• Long NVDA 9–12 month call spread to play increased retailer spend on AI forecasting and edge compute (buy nearer-term call, sell higher strike) — limited cost, high optionality if Kroger-style or Kohl’s pilots expand. Risk: retail AI budgets reallocated; reward: secular adoption lifts incremental data-center demand.
• Contrarian long KSS equity with a protective 9–12 month put (collar) sized as a tactical 1% portfolio position — if you want exposure to real-estate/omni optionality while limiting headline risk. Upside: capture valuation rerating if comps stabilize; cost: premium for downside protection, acceptable to cap drawdown to predetermined level.