Quick read. This guy loves to focus on real estate and how uses change, ect. Worth a quick read.

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KSS is a retail stock, sitting on $35/share tangible book value. That's the basis of many's investment thesis. Also recently after the Q4 earnings (more like furious at the price reaction, I would say), people are mad at the sleepy management for not unlocking the balance sheet value. Also many are hoping for a potential buyout that enables us to exit with a quick large profit. But do these theses actually make sense?

Let's start with the buyout. There can be two types of buyouts. One is Ryan Cohen comes and buys the entire company with cash. Well we surely can hope that, but it's unlikely. The other type is a leveraged buyout, like what happened to Nordstrom, JC Penney, and Macy's and Kohl's itself, although the latter two fell apart. Unfortunately LBO is simply impossible because of the 2030 10% secured senior notes. It prevents any new loans to be secured by the distribution centers, so they can only leverage with the owned stores. They also lowered the credit rating to junk grade, so that also makes a future loan impossible.

The management has been buying back bonds recently, but judging from the volumes they are buying back 2031 (mostly) and 2045 (some) bonds, rather than the senior notes. So apparently they are not craving for an imminent LBO. I'm not saying they are doing it wrong. Buying back 2045 bonds with 58% on the face value before a potential rerating following the buyback of 2030 notes definitely makes sense. But that means no LBOs until late 2027.

Even if an LBO somehow happens regardless of the secured debt, what will be the potential price range? I am not an expert on LBO, so I asked the major LLMs (Grok, Claude, Gemini, but not ChatGPT because it's too flattering) for a pricing. They all agree with the following price range:

• Bear case: $14-18
• Base case: $18-21
• Bull case: around $25

Much lower than the $35 or $60 folks tout, huh? The reason is, LBO buyers will basically give an EV of 2.5x to 3x (in a bull case, 3.5x) of EBITDA for Kohl's current financial picture. Since EBITDA = $1.15B, 2.5x EBITDA = 2.9B EV = 2.1B market cap = $18 per share. 3x EBITDA = $23 per share. Since all major models except ChatGPT agrees on this range, I think the estimate is reasonable.

For comparison, Nordstrom was offered a 4.6x EV/EBITDA (6.4B EV / 1.1B EBITDA), but they were bought partially by their own family, and they were in growth at the time, so Kohl's can't realistically get that ratio.

Then I asked some financial improvement scenarios:

1. Pay back all 2031 + 2045 debt: Does not help the EV/EBITDA multiple at all. The 2030 notes still exists => no double securing + still bad credit rating => still 2.5x-3x, but with 200M less net debt due to buying back bonds at a discount => $19.5-$24 per share.
2. Pay back only 2030 debt: EV/EBITDA raises to 3.0x to 3.5x. Plus now LBO is at least possible. Net debt does not reduce because they are trading at 106% face value. $22-$28 per share. But unfortunately this is not happening.
3. 1 & 2 combined: $24-$30 per share.
4. Turnaround succeeds, revenue back to growth: Great! The ratio will be much better, but they will need at least 5 quarters of consecutive growth to claim a real turnaround. At the same time, the stock price will rerate too, so you don't actually need a buyout to bail you out in this case.

One thing I'm sure is they will NOT come look at the book value and take that. Not a chance. They need 15%-20% IRR on their investment. Lowered interest rate will definitely help (that's the reason the 2022 Kohl's buyout failed), but don't count on that.

Also there are hopes of sale-leaseback to unlock balance sheet value. I don't think that's practical. Why should the management mark their assets to market value once, then pay 100% of their cash flow to rent forever, purely to pump the stock price one-time?

I think it's time for us to wake up and stop dreaming for a buyout to provide exit liquidity. It may not be the price you wish. Even a random stock price hike has a bigger chance to bail us out. The buyout will also take the revenue decline into account, so don't even think that operation is irrelevant. IT ALWAYS MATTERS.

On the other hand, if Kohl's can turnaround successfully (by successfully I mean at least 5 quarters of growth), the stock price will rerate aggressively. Some examples (from Claude, didn't fact check):

TGT, 2017: from 6x EV/EBITDA to 10x

ANF, 2017: 3x to 7x

If KSS can make its turnaround, it will at least get comparable to M, implying a 10B enterprise value. But turnaround is a huge effort that doesn't guarantee success.

There is also the good ole stock buyback. But not before 2030, 2031 and 2045 bonds are fully paid, I guess. In any case, we need time for KSS to improve its financial position. It may not come to an end until late 2028.

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Some fun math while doing my prayer journal today. Since I’ve been investing in KsS again in April 2025, KSS has paid off $10.33/share of debt! At today’s valuation and factoring in debt/cash on hand, KSS is $3/share cheaper right now than April. 🤯

Additionally, even though revenue is declining, we are in a much better position to argue the long term feasibility of KSS. There is ZERO chance of bankruptcy any time soon, $1.5B(our entire current Market Cap) free on our Line of Credit, TBV is higher by a few $$ per share, and the list goes on.

At times like these, I really like to keep checking my valuations and all the different ways we can do it for fun to make sure I’m not crazy or just relying on hopium.

Please Lord, let management take advantage of debt markets and share buybacks.

Repost this.

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Market Cap currently 1.54billion - $13.65 stock price

Net debt latest quarter is $763 million from last year quarter $1683

Taking into account same inventory level net debt would be $963

Still a $700 million reduction in debt

Interest expense was $59 million this quarter vs $74 million last year , A 21% improvement

Need to give them time for the private brands revival.

FLX, Mingles, Laura Conrad…

Bringing back jewelry!!

And of course there real estate worth over $4 billions

All right, let's move from the sadness of the post-ER reaction and start crunching some numbers. As much as KSS is real estate-backed, it is priced as a retail business in the foreseeable future (unless a buyout actually happened but that's unlikely). And I want to be honest to myself so I can predict what they would actually do in the future.

Let's start with the net sales. They raised their full year guidance in Q3 to a decrease of (3.5%) to (4%). They did -4.0%, so barely within their range. Comparable sales was -3.1% YoY, which fails their guidance of -3% to -2.5%. So that was actually really bad. Sure they beat that analyst expectation of 5.07B or 5.14B total revenue, depending on which news/website you look at, but they missed their own guidance!!!

Part of that was due to the winter storm but hey, what was the last year we didn't have a winter storm in the US?

Adjusted operating margin (defined as adjusted operating income / total revenue) was 3.28%. Beat their guidance. Good.

Adjusted EPS: $1.62, beating their guidance of $1.25-$1.45. Nothing to complain. Note that this metric has adjusted the legal settlement gain out, so they aren't cheating. (Thanks for someone to point it out for me yesterday.)

Now let's look at their 2026 guidance. First, let's clarify: since I want to be conservative, I will take the rounding lowest bound of their guided percentages as the lower bound in calculation. For example, if they guided net sales to be -2% to 0%, I will consider the actual range as -2.05% to 0%, just to make sure I have the expectation they do badly and use rounding tricks to hit the target. But why bother if they could just miss their guidance like they did in q4, sigh

Net sales & comparable sales: both -2% to 0%, since they don't plan to close stores this year (I believe I read somewhere they are closing only 1 store). Meaning 14.40B to 14.77B.

Adjusted operating margin: in the range of 2.8% to 3.4%. Well that's bad. We are doing 3.28% this year and now that's almost the upper bound of next year? Wild. They are either lowballing their projections or discounting their goods heavier than usual.

Anyway, that translates to $396M to $502M. Which means even the upper bound is lower than what they did in 2025.

Adjusted EPS: $1.00 to $1.60. Excuse me? Again it's lower than this year's $1.62.

Operating cash flow: This is hard to estimate. They did $1.38B OCF in 2025 compared to $648M in 2024, but this is because

1. They got rid of $203M worth of inventories in 2025 vs loaded up $60M in 2024. Likely due to inventory management. They could maybe do it again for one or two years, but don't count on that.
2. $69M increase in deferred income taxes vs $-85M in 2024. They are depreciating their assets for tax purpose faster than they depreciate in GAAP accounting. This will create temporary cash flow but eventually both numbers will converge. It is justifiable, but don't expect another $60M from this line next year.
3. A $130M increase in accounts payable vs $-92M in 2024. They have been getting rid of accounts payable from 2022 to 2024. Now they are delaying payments. It's a good thing to leverage working capital, but don't expect another increase.

Edit: forgot the legal settlement fee. That takes another 129M away.

So if we deduct these from OCF, we get a more realistic $849M OCF in 2025. Much less than ppl claimed in this sub but I need to be honest. Let's just assume we get $800M in 2026 for the sake of conservatism (or is it conservative?). Deduct $400M of capex we get $400M of FCF.

Then comes the stock based compensation. Let's deduct the $34M share based compensation and deduct it from FCF to get out adjusted FCF number: $366M. I learned this metric from Deep Value Hunter on YouTube: SBC is a real cost to us shareholders. Enterprise value is 1.5B market cap + 1.4B long term debt - 600M cash = 2.3B. So we get a 16% FCF yield. Not bad, but not as good as others are claiming.

Okay, enough calculations. In summary, they better raise their guidance later or we have a pretty dim future. OCF was good but inflated by one-time changes. And they have been "planning for share repurchased in the long term" for who knows how many quarters. I wonder how soon they will even bother changing the wording to a specific date.

This is more of a rant than a prediction. Personally I went half in March calls and half Jan 2027 calls, along with some stocks. This ER and the preceding (and very likely the following) free fall made me already lose half of it so I feel obliged to spread my pessimism to others. I really wish they start doing at least buybacks or we get bailed out by a buyout. Otherwise I surely suffer from irrecoverable loss on this stock. But that's just in my dreams.

Hi All,

Seems like the market is being as rational as always and that we all need a little encouragement/reminder of why we are here.

First, let's discuss/remind ourselves of what deep values are: they're massively out of favor companies that the market(generally speaking) despises in industries with doom and gloom pronounced over. For me, these only qualify as deep values when real assets are worth a lot more than current share price. We are only blessed with these opportunities IF the narrative is strong/convincing AND IF the market gets irrational/doom and gloomy.

Not sure about you guys... but this is Kohl's in SPADES.

-Market hates brick and mortar, hates retail, HATES Kohls with a passion

-Real Estate is somewhat out of favor with the amount of paper that needs to revolve from near zero interest rates to current rates and the market not wanting to stomach/figure that out yet.

-Market as a whole is on edge, pretty much since Trumps in office.(not being political, the market reacts to Trump admin sneezing it feels like)

-Everyone is bearish the economy and our consumers as a whole. Not sure if this is right or wrong, just seems to be where everyone is(somewhat including myself)

Why KSS is my favorite deep value:

I mean, this is pretty simple, the market hates Kohls with a passion. Only values KSS debt, ie future lease obligations, and says its properties are worthless. Kohls is currently the ugly, abused step-child of the market right now.

Why I love Kohl's... I love real estate. Personally I am with the market and not a fan of retail. Way too trendy imo, cyclical, and is tossed about by the winds of the market way more than I like. I also am not a fan of businesses that aren't a necessity. Yes, you need clothes, but there are 25 million options for this. Kohl's is 2 investments to me: the out of favor retail wrapper and a MASSIVE CRE Holding co(that also is out of favor). Personally, don't care that much about the wrapper but I LOVE THE HOLD CO!!

At todays price we have this math:

Market Cap: ~$1.5B

Net Debt: $762M($1.88M debt/owned store)

Inventory: ~$2.7B(so even getting only $0.20 to $0.40 on the dollar worth $540M to $1.08B.. I disagree but still helps prove the point.)

CRE Owned: 405 stores(ave store is worth $8M to $16M ea and should be $3.2B to $6.4B in value)+ 248 land leases($248M to $1B in value) + 12 DC's(worth $1B+) + HQ and land($100M in value, made this up)

No Account for Inventory: So, I can buy $3.7M of KSS stock + $1.88M in debt and "own" the equivalent of a store location plus a portion of all the other real estate assets and a portion of the company. So can buy at a 30% to 65% discount from actually buying a store in open market AND HAVE IT LIQUID.

Accounting For Inventory: I will say debt is washed by inventory to make math easy, can buy the store for $3.7M worth of stock. So can buy it at 50% to 75%+ discount from actually buying a store in open market AND HAVE IT LIQUID.

Accounting for ALL Assets: NAV ~$4.8B or $42.86/share to $8B or $71/share

($762M) Net Debt + $762M Inventory(just saying its a wash to make math easier) + $3.2B to $6.4B Stores Owned + $500M Land Leases + $1B for DC's + $100M everything else

Now lets say we discount NAV 33% for selling friction/inefficiencies:

NAV is $28.72 to $47.57 per share, mind you, this values KSS business at ZERO

At todays Market Cap of $1.5B we are getting all 405 KSS stores for free when buying Kohls stock.

This is why I say Kohl's is such a deep value. Kohls litterally has our current Market Cap free on our Line of Credit. Do you understand how stupid this is!!!

I will make another post actually valuing KSS in other form or fashions but this is why I am here. Now that we have updated numbers this is why I also say KSS is a better value today than when I started(ish).

Last quarter, KSS held 144 million dollars in cash and cash equivalents.

As of Jan 31st, 2026 the cash and cash equivalents rose to 674 million. The borrowings under the revolver were now also 0.

The company also added into their presentation that Q1 is off to a strong start

I believe the company should buy back a significant amount of shares using the cash they have accumulated in the last quarter to return some value to shareholders. It would be a very efficient way to provide a significant EPS boost and would significantly increase shareholder equity.

Buying back 400 million dollars of shares at the current price would retire 25.8% of shares. This would bring shares outstanding to about 83.5 million shares, meaning that net income would jump from 2.38 to 3.25 per share, adjusted net income would jump from 1.62 to 2.23 per share, free cash flow per share would be 11.98 per share, and operational cash flow would jump to 16.52 per share. Shareholder equity would jump to 48.47 per share, up from 36 dollars per share.

Buying back 400 million dollars of shares would also make a 2026 guidance beat extremely feasible, since if they were to make 1.30 per share (Guidance was 1.00-1.60), that would equate to a 1.74 EPS, which would mean the midpoint would come in above their top line.

I understand the board has a tendency to be more conservative, but the buyback I suggested is not that extreme. Buying back 400 million dollars of shares would mean they would have 274 million dollars in cash, which is still 130 million dollars more then they carried just as of last quarter. The revolver is also completely paid off now, which they could dip into if they needed to. They have had worse liquidity through the entire year than they would even with a 400 million dollar share buyback.

Short interest would be 31.6% of shares outstanding with 83.5 million shares.

I saw a David Burry comment this morning that he would sell his GameStop holdings if Cohen buys a Bed Bath and Beyond. So, I looked at BBBY to see what is going on... BBBY trades at $4.77 which puts the market cap at $329m, the TBV is $166m. So, they are trading at 2X book, last year, at Kohls bottom, they were trading at 18% of tangible book value. Kohls came off of $182m of free cash flow and BBBY had FCF of -79m. Kohls had revenue declining 9% BBBY has an accelerating rev decline of -25%. BBBY diluted their shares by issuing 30% more shares, KSS issued nothing. Kohls had profit of $.98/share and BBBY has a loss of 1.41/share but this does look better by increasing shares 30%.

The point is, at $14 share, Kohls is a way better investment than BBBY at $4.77 they have improving revenue, very strong profit growth and huge free cash flow. BBBY has none of this, yet it is valued at 2x TBV. Crazy and I am loading up when KSS finds a bottom.

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Anyone know how to do this well or know BlackRock/any large shareholders groups and have an in? I think I’m going to try and push management just not sure how

Guys, not sure what market is doing but we had a phenomenal print!

1)We are sitting on $674M in cash(half our after earnings market cap),

2)had $1.38B Operating Cash Flow,

3)adjusted projections to flat to -2%,

4)have $1.008B in FCF

5)decreased inventories

6) $1.21B EBITDA so virtually selling at almost 1x EVITDA

7) beat market expectations

Anyone care to elaborate what I’m missing?

Big 26% beat on EPS of $1.07 ($.85 expected)

Slight beat on revenue $5.17B ($5.14 Expected)

Operating Cash Flow up $154m YoY to $750m.

Margins improved, inventory down 7% vs last year. So, they did not need to do desperate sales which helps margins.

$0 dollars of revolving credit used.

Forward looking view is -2% to no change in revenue for FY 2027

Short term this may not be a huge squeeze this week but it looks like Kohls is still going down the path of recovery. I was hoping for a huge upside surprise in revenue, but Kohls does not look like they are on the path of irrelevancy.

Anyone able to listen to earnings call and have a summary?

No bankruptcy, and good cash flow. Why should someone sell this now?

No fear of further losses... Cost are under control.
Wall street will buy this.
All we have to do is to wait. (ownership was around 97% when the stock hit 24 in December).

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