Kohl's Corporation (KSS) and the Short Squeeze Time Bomb: Retail Investor Frenzy or Institutional Overreach?

In the volatile world of retail stocks, few dynamics are as unpredictable—and potentially explosive—as short squeezes. Kohl's Corporation (KSS) has become a lightning rod for this phenomenon, with its short interest metrics and recent price action painting a picture of both opportunity and peril. As of June 30, 2025, KSS had a staggering 53,012,353 shares shorted, representing 49.31% of its float. This is not just a bearish bet—it's a full-blown shorting frenzy.

The Short Interest Dilemma

Short interest is a double-edged sword. On one hand, it reflects widespread pessimism about a stock's future performance. On the other, it creates a structural vulnerability: if the stock rises sharply, short sellers are forced to buy shares to cover their positions, potentially fueling further price increases. For KSS, the short interest ratio (Days to Cover) of 6.68 is a red flag. This means that, at current trading volumes, it would take short sellers nearly a week to offload their positions—a timeline that could collapse under sudden buying pressure.

The recent surge in KSS's price in July 2025—driven by meme stock dynamics and coordinated retail investor activity—has already triggered early signs of a short squeeze. Social media platforms have amplified retail sentiment, with traders viewing KSS as a “GME 2.0” (referring to GameStop's 2021 short squeeze). The result? A self-reinforcing cycle where short covering begets more price gains, which begets more short covering.

Institutional Bearishness vs. Retail Optimism

The institutional short positions in KSS, as disclosed by entities like Jane Street Group, Goldman Sachs, and Royal Bank of Canada, underscore a deep-seated belief in the company's long-term struggles. These firms likely bet on KSS's challenges in adapting to e-commerce, shifting consumer preferences, and debt management. However, their bearish thesis may be colliding with retail-driven market psychology, where sentiment often overrides fundamentals in the short term.

This clash between institutional and retail forces is not new, but it has taken on a more volatile character in recent years. The rise of commission-free trading platforms and online forums has democratized stock speculation, enabling retail investors to act in unison. When a stock like KSS becomes a rallying point for these groups, the result is a liquidity-driven price surge that can outpace both fundamental analysis and traditional risk models.

The Risks of a Short Squeeze

While a short squeeze can create a temporary windfall for long investors, it also introduces significant risks. For one, the squeeze is often a short-lived event. If KSS's fundamentals fail to justify its elevated price, the gains could evaporate just as quickly. Additionally, short sellers may retaliate by shorting the stock again once the squeeze subsides, leading to renewed downward pressure.

Moreover, the high short interest percentage (49.31%) suggests that many investors are already positioned for a decline. If the stock's upward momentum stalls, these bears could regain the upper hand, triggering a sharp reversal. This volatility makes KSS a high-risk proposition, even for those betting on the squeeze.

Investment Advice: Proceed with Caution

For investors, the key takeaway is this: KSS's current trajectory is less about its business model and more about a liquidity-driven market psychology. While the short squeeze offers a tantalizing opportunity, it is inherently speculative. Those considering a long position should treat KSS as a high-beta, short-term trade rather than a long-term holding.

Hedging strategies, such as using options to cap downside risk, may be prudent. Alternatively, investors could short the stock themselves, but only if they are prepared for the possibility of a squeeze. For conservative investors, the risks outweigh the rewards, and KSS should be avoided until its fundamentals align with its price.

In the end, the KSS saga is a microcosm of a broader trend: the power of retail investors to reshape market narratives. But in doing so, they've also exposed the fragility of traditional shorting strategies. Whether this is a cautionary tale or a blueprint for the future remains to be seen. For now, the only certainty is that the next move in KSS's story will be written in real time—and with plenty of drama.