Kohl’s Corp. shares surged more than 17% in premarket trading on Wednesday, marking one of the retailer’s strongest single-day gains in recent memory and signaling investor optimism about its ongoing turnaround efforts. The catalyst? A raised annual profit forecast driven by cost reductions, improved inventory management, and a fresher merchandise mix that’s drawing customers back to stores. At the heart of this revival are strategic bets on beauty products and impulse purchases, which are not only boosting sales but also enhancing the overall shopping experience in an increasingly competitive retail environment.

The department store chain, long beleaguered by declining foot traffic and fierce online competition, reported second-quarter adjusted earnings of 56 cents per share, surpassing analyst expectations of around 30 cents, according to data compiled by Investing.com. Revenue came in at about $3.35 billion, roughly in line with forecasts, but gross margins expanded by 28 basis points, reflecting tighter expense controls and a legal settlement that flattered GAAP results. Despite persistent sales declines—comps down 4.2% and overall sales off 5.1%—management’s upbeat guidance for full-year earnings per share of 50 to 80 cents has ignited hope that Kohl’s is finally turning the corner.

Beauty Boom: Sephora Partnership as a Growth Engine

Central to Kohl’s strategy is its partnership with Sephora, which has transformed the retailer’s beauty offerings into a major draw. By spring 2025, Kohl’s had rolled out Sephora shops to all 1,050 of its stores, positioning the company to build a $2 billion beauty business, as detailed in its latest investor presentation. Beauty sales have surged, with reports from AInvest noting a 45% jump in the category during Q2 2024, attracting 40% of first-time shoppers to Kohl’s. This influx isn’t just about lipstick and skincare; it’s driving ancillary buys, as customers browsing Sephora sections often pick up gifting items or apparel on their way out.

Insiders point out that this integration has been a linchpin for growth amid broader economic headwinds. Unlike digital sales, which continue to lag—down 8.7% annually according to Nasdaq analyses—the in-store beauty experience is fostering loyalty and higher basket sizes. CEO Ashley Buchanan, who outlined the turnaround plan in a March Yahoo Finance interview, emphasized focusing on “fresher product line-ups” to combat years of stagnation. The strategy appears to be paying off, with home decor up 35% and fine jewelry reintroduced to capitalize on resilient demand for premium items.

Impulse Purchases: Revamping the Checkout Experience

Equally pivotal is Kohl’s push into impulse purchases, expanding queue lines to over 300 additional stores as part of its Q2 initiatives. These strategically placed displays of small, affordable items—like accessories, snacks, and seasonal novelties—are designed to capture last-minute buys, boosting average transaction values. According to a Reuters report on the profit forecast lift, this move, combined with cost-cutting measures, has helped offset macroeconomic pressures such as inflation and cautious consumer spending.

The emphasis on impulse aligns with broader retail trends, where physical stores leverage tactile, immediate gratification to differentiate from e-commerce giants. Posts on X (formerly Twitter) reflect growing sentiment around this tactic, with traders noting the stock’s 18.8% premarket pop tied to “Sephora tie-ups and inventory reduction,” as shared by accounts like NOTRELOAD AI. Yet, challenges persist: short interest remains high, fueling potential squeezes, but digital weaknesses could undermine long-term gains if not addressed.

Leadership and Market Challenges in Focus

Kohl’s journey hasn’t been without turbulence. The stock hit a 30-year low of $6.13 in April 2025 before rebounding 19.6% by May, per AInvest data, amid leadership shifts including Buchanan’s tenure and subsequent adjustments. A May Reuters piece highlighted the company’s resolve to stick with its plan despite tariffs and executive changes, underscoring the Sephora partnership’s role in sustaining demand for higher-end beauty amid competition from Target and Walmart.

Analysts at Telsey Advisory Group reiterated a “Market Perform” rating post-earnings, citing the earnings beat but cautioning on ongoing sales softness, as reported by Investing.com. Economic uncertainties, including potential tariffs, add layers of risk, yet Kohl’s inventory discipline—reducing stock levels to improve margins—suggests a more agile operation.

Outlook: Sustainable Turnaround or Short-Lived Rally?

Looking ahead, Kohl’s raised outlook hints at stabilizing consumer demand, particularly among value-oriented families. Bloomberg noted the “rosier outlook” as evidence of turnaround traction, with shares jumping on stronger-than-expected results. However, for industry insiders, the real test lies in holiday performance and digital recovery. If beauty and impulse strategies continue to drive traffic, Kohl’s could reclaim its position as a go-to destination.

Comparisons to peers like Macy’s, which is also closing underperforming stores to focus on prime locations, reveal shared pressures but unique opportunities. Kohl’s private brands and partnerships may provide an edge, yet persistent comp declines remind us that retail recovery is rarely linear. As one X post from Finsee observed, “Margin progress is clear, but sales decline persists”—a sentiment echoing across trading floors. Ultimately, while the stock soar reflects tactical wins, sustained execution will determine if this is a true inflection point or merely a reprieve in a challenging market.