Kohl’s Crossroads: Leadership Turmoil or Strategic Turnaround?

Amid a retail landscape dominated by Amazon and Walmart, Kohl’s (NYSE:KSS) finds itself at a critical juncture. Over the past three years, the department store giant has weathered leadership upheavals, ethical scandals, and strategic pivots. Yet, recent financial recoveries and investor optimism suggest this may be a moment of reckoning—not ruin—for the brand. Let’s dissect the chaos and clarity.

The Leadership Storm: Scandals and Stock Swings
Since 2023, Kohl’s has seen a revolving door of executives, each departure shaking investor confidence. In 2025, the most explosive event came when CEO Ashley Buchanan was fired for orchestrating $2.5M in unethical vendor deals, triggering a 9.6% stock surge the next day. This rebound wasn’t just about scandal relief—investors also cheered narrower-than-expected Q1 losses of 20–24 cents per share.

Yet the path has been rocky. Between 2024 and early 2025, Kohl’s stock plummeted 51%, hitting a 30-year low of $6.13 in April 2025. By May, it had rebounded to $7.33—a 19.6% recovery. The question remains: Is this a sustainable turnaround, or a temporary reprieve?

Strategic Shifts: Sephora Shines, Digital Lags
The glimmer of hope lies in Kohl’s most successful partnership: Sephora. With 1,050 shops within Kohl’s stores by 2025, beauty sales surged 45% in Q2 2024, attracting 40% of first-time Kohl’s shoppers. This has become a linchpin for growth, driving ancillary purchases in gifting and impulse items.

Meanwhile, CEO Thomas Kingsbury’s initiatives—including reinvigorating home decor (up 35%) and reintroducing fine jewelry—show promise. However, digital sales remain a weak spot, declining 8.7% annually, while competitors like Target and Walmart dominate online shopping.

The Governance Gamble: Trust and Transparency
The fallout from Buchanan’s ouster exposed deeper governance flaws. Board member Christine Day’s resignation over secrecy culture and the SEC’s scrutiny of internal emails highlight lingering risks. For institutional investors, stability hinges on overhauling ethics policies and diversifying the board with independent directors.

Why Now? The Case for Buying the Dip
Despite the chaos, Kohl’s presents a compelling value proposition:

1. Undervalued Stock: At $7.33, the stock trades at just 0.5x its 10-year average P/E ratio. Even with a 51% decline since 2024, the rebound post-Buchanan suggests investor faith in the underlying business.

2. Sephora’s Steady Growth: Beauty now accounts for 45% of Kohl’s sales growth, a category immune to economic cycles. Expanding Sephora shops into the remaining 300 stores could unlock further upside.

3. Cost Discipline: Kingsbury’s focus on inventory management and expense cuts has narrowed losses. With a 17.5% stock rebound in May alone, the market is pricing in operational resilience.

4. Legacy Assets: Kohl’s owns 1,150 stores—prime real estate in 49 states. Even as it closes underperforming locations, its physical footprint offers a unique advantage over purely online rivals.

The Risks—and How to Mitigate Them
- Digital Backlog: Competitors are lapping Kohl’s in online engagement. A strategic partnership with a tech firm (e.g., Shopify) or hiring a digital-native CEO could bridge this gap.
- Governance Trust: A new board committee focused on ethics and transparency, coupled with independent audits, is non-negotiable.
- Economic Sensitivity: Middle-income shoppers, Kohl’s core audience, may cut discretionary spending in a recession. Diversifying into essential categories (e.g., affordable appliances) could stabilize revenue.

Final Call: Buy with a 5-Year Horizon
Kohl’s is a diamond in the rough. Its stock’s 51% decline has created a rare entry point. While the path forward demands execution on digital upgrades and governance reforms, the Sephora engine, store portfolio, and cost discipline suggest a 20–30% upside over five years.

For patient investors willing to overlook short-term volatility, Kohl’s offers asymmetric risk-reward: limited downside (given its undervalued metrics) and significant upside if strategic bets pay off. This is a call to act—not because the storm has passed, but because the seeds of revival are finally being planted.

Action Item: Allocate 2–3% of a diversified portfolio to KSS. Set a stop-loss at $6.50 and a target of $10–$12 within two years. Monitor quarterly digital sales trends and board composition changes for signals.

The chaos may not be over, but the opportunity is clear.