Kohl's (KSS) Surges 17.9% on Earnings Beat—Can This Momentum Sustain?

Summary
• KSS surges 17.87% to $15.37, breaking above 52-week high of $21.39
• Intraday range: $15.23–$16.83, turnover hits 31.4M shares
• Earnings beat, guidance hike, and inventory cuts drive optimism
• Dynamic PE at -28.7x, RSI at 59.67, MACD near signal line
Kohl's (KSS) has ignited a 17.9% rally on August 27, fueled by a surprise second-quarter earnings beat and revised guidance. The stock’s sharp rebound from a 2025 low of $6.04 to $15.37 reflects renewed investor confidence in its turnaround strategy, despite ongoing leadership turmoil and sector-wide retail challenges. With options volatility spiking and technical indicators mixed, the question now is whether this momentum can translate into sustained gains.

Earnings Beat and Guidance Hike Drive KSS's Sharp Rally
Kohl's 17.9% surge stems from a $0.56 adjusted EPS beat (vs. $0.29 expected) and a raised full-year guidance range of $0.50–$0.80. The company also narrowed its sales decline forecast to 5–6% from 5–7%, while cutting inventory by 5% to $3B. Interim CEO Michael Bender highlighted disciplined cost-cutting (SG&A down 4.1%) and gross margin expansion (39.9%), signaling progress in its 2025 initiatives. Despite ongoing leadership instability (third CEO in three years) and a 5.1% YoY sales drop, the stock’s reaction underscores optimism about its turnaround potential.

Department Stores Sector Trails KSS's Volatility as Macy's (M) Gains 0.9%
The department stores sector remains underperforming, with Macy's (M) up just 0.9% despite KSS's 17.9% surge. While KSS's earnings beat and inventory reduction have isolated it as a short-term outperformer, the sector faces broader challenges like shifting consumer habits and e-commerce competition. KSS's sharp move is more a function of its specific operational improvements than sector-wide momentum.

Options Playbook: KSS20250905P16 and KSS20250905C15.5 for Short-Term Volatility
• RSI: 59.67 (neutral), MACD: 0.78 (bullish), 200D MA: $11.17 (below price)
• Bollinger Bands: $10.12–$15.09 (price near upper band)
• 30D support: $12.74–$12.84, 200D support: $8.14–$8.39
• KSS's 17.9% rally has created a volatile setup, with key resistance at $16.83 (intraday high) and support at $15.23 (intraday low). The RSI at 59.67 suggests no immediate overbought conditions, while the MACD histogram (-0.05) hints at fading bullish momentum. For leveraged exposure, consider the options chain below:

• KSS20250905P16: Put option, strike $16, exp. 2025-09-05
- IV: 82.30% (high), Leverage: 12.59%, Delta: -0.5939 (moderate), Theta: -0.0794 (high decay), Gamma: 0.1847 (high sensitivity), Turnover: 276,930
- IV indicates elevated volatility, Leverage amplifies downside potential, Gamma ensures sensitivity to price swings.
- This put offers short-side potential if KSS retests $15.23 support, with high liquidity and time decay working in favor.

• KSS20250905C15.5: Call option, strike $15.5, exp. 2025-09-05
- IV: 84.40% (high), Leverage: 19.69%, Delta: 0.4969 (moderate), Theta: -0.0024 (low decay), Gamma: 0.1854 (high sensitivity), Turnover: 34,056
- IV supports bullish bias, Leverage enhances upside, Theta minimizes time erosion.
- Ideal for aggressive bulls targeting a break above $16.83, with high gamma ensuring responsiveness to price surges.

Payoff Estimation: A 5% upside (to $16.14) would yield $0.64 for the C15.5 (vs. $0.56 breakeven) and $0.14 for the P16 (vs. $0.40 breakeven). Aggressive bulls may consider KSS20250905C15.5 into a bounce above $16.83, while cautious bears may short KSS20250905P16 if $15.23 support holds.

Backtest Kohl'S Stock Performance
Increasing KSS by 18% intraday has historically led to positive short-to-medium-term gains, though the strategy isn't consistently profitable across all periods. The 3-Day win rate is 35.88%, the 10-Day win rate is 38.52%, and the 30-Day win rate is 40.11%, indicating a higher probability of positive returns in the short term. However, the maximum return during the backtest period was only 8.60% over 30 days, suggesting that while there is a good chance of a quick gain, the overall upside is limited.

KSS at a Crossroads: Hold for Breakout or Secure Profits?
Kohl's (KSS) 17.9% rally has created a pivotal juncture. While the earnings beat and inventory reduction justify optimism, the stock remains 28% below its 52-week high of $21.39 and faces leadership uncertainty. Technicals suggest a test of $16.83 resistance and $15.23 support in the near term. Sector peers like Macy's (M) remain muted, with a 0.9% gain underscoring KSS's isolated momentum. Investors should monitor the 200D MA ($11.17) as a critical support level and watch for a breakout above $16.83 to validate the rally's sustainability. For now, KSS20250905C15.5 offers leveraged upside potential, while KSS20250905P16 provides downside protection. Watch for $16.83 breakout or a pullback to $15.23 to dictate next steps.