KSS

Kohl's is the textbook cheap-but-shrinking retailer. Revenue has fallen every year for four straight years — $19.4B (FY2022) → $18.1B → $17.5B → $16.2B → $15.5B (FY2026), down another 4.3% this year — and the MD&A pins the cause on a ~4% drop in transaction volume with sales falling across every line of business except Accessories (+2%). Comparable sales and store traffic are eroding structurally; digital is merely flat at 29% penetration. This is a melting-ice-cube top line, not a temporary dip.

The FY2026 'recovery' — net income +149.5% to $272M, EPS +142.9% to $2.38, operating income +44.1% to $624M — is almost entirely self-help, not demand. Management drove gross margin up 34bps to 37.5% via fewer clearance markdowns (inventory down 7%, receipts down 8%) and cut SG&A 4.1% on lower payroll and marketing. That is good execution, but margin gains from shrinking inventory and cutting costs have a floor; you cannot cost-cut your way to growth indefinitely, and operating margin is still thin at 4.0% with ROE of just 6.7%.