Kohl's, J.C. Penney and Saks Face a Make-or-Break Holiday

By Daniel Okafor

Kohl's, J.C. Penney and Saks Fifth Avenue head into retail's "golden quarter" with the most at stake among department stores, and analysts say the season will decide whether each can stabilize. Simon-Kucher's 2026 Holiday Shopping Report names department stores among the top destinations for browsing and buying this year, which makes the test sharper: demand will be there. Conversion into profitable sales is the open question.

"Kohl's, J.C. Penney and Saks are three very different bets, but each faces a critical test this holiday season," Glenn McMahon, partner at MAC Advisory and Consulting, said by email. "The issue is not simply whether consumers will spend; it is whether these retailers can convert holiday demand into enough profitable sales and cash flow to address deeper business challenges."

"People like department stores," Michael Appel, president of Appel Associates, said by phone. "The department store format, outside the United States, is working very well."

Not every U.S. name is struggling. Dillard's gained market share in its most recent quarter. Macy's has shown clear turnaround signs under CEO Tony Spring, and Bloomingdale's has thrived. Nordstrom, now private and no longer reporting results, appears to be doing well.

What does the holiday change for Kohl's?

Kohl's turnaround has dragged on for years with little to show. Last year, Q4 net sales fell 4%, with comps down nearly 3%. Full-year net sales dropped 4% and comps fell over 3% versus 2024.

The chain still generates good cash flow and carries little debt, so it can afford to keep restructuring into next year, according to David Silverman, senior director at Fitch Ratings. As of last month it has a new chief merchant: former Walmart fashion executive Ryan Waymire, who also worked at Wayfair, FabFitFun, Amazon and Target.

One setback stings. The Sephora shop-in-shops, long touted as a traffic and sales driver, posted sales declines for two straight quarters.

"Kohl's needs to give middle- and lower-income shoppers a compelling reason to choose its stores over off-price chains, mass merchants and online rivals," McMahon said. "Another weak holiday would raise questions about how much longer Kohl's can pursue a turnaround without further restructuring."

Its holiday comps, traffic, markdowns and gross margins will be under a microscope, McMahon said.

Can J.C. Penney stop the slide?

J.C. Penney made strides in 2025, then stalled. Q4 net sales tumbled 8% against the 2024 holidays, and the declines continued into 2026. In its most recent quarter, net sales fell 8% year on year and the retailer lost market share, though activewear and beauty were strengths.

Penney has structural protection. It sits inside Catalyst Brands, a conglomerate that includes many Authentic Brands Group names. Co-owners Simon Property Group and GGP (formerly Brookfield), who bought the retailer in 2020 during its bankruptcy, have an incentive to keep stores open — partly to prevent lease clauses that would let other tenants exit or renegotiate.

"J.C. Penney's been on a downslide for a long time, but they're protected, because of the fact that they need them to be in those malls," Appel said. "They probably have to invest a lot more money in the stores. They're treading water in my opinion."

At some point Penney must show improvement, because declines this large signal business model risk, Fitch's Silverman said.

"Penney's holiday performance will test whether its combination of affordability, apparel, home and beauty can drive traffic and spending without excessive discounting," McMahon said. "The risk is that persistent weak sales and thin margins leave the retailer with too little financial flexibility to invest in its future."

Does Saks have the most to prove?

Yes, analysts agree. After a tumultuous 2025, Saks Global landed in bankruptcy court early this year. It had struggled to pay vendors all year, leaving shelves thin during the critical holiday quarter. It exited Chapter 11 as "Exemplar Luxury Group," still running Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman, with debt trimmed to under $1 billion.

"Exemplar (Saks/Neiman Marcus) has the most to prove, following a year in which the company completed a bankruptcy process, changed management teams, and has implemented efforts to improve vendor relationships," Silverman said. "The industry will be focused on the company's inventory position and ability to re-engage with customers that have defected in recent years."

The Saks banner shrank the most in bankruptcy. Its full-line footprint was cut in half, to just 15 stores, with almost zero off-price locations.

Appel questions whether the remaining stores get enough support. Holiday marketing centers on the Manhattan flagship. "What about the other stores? If they're not supporting them equally — and we don't know the answer — then they're not going to perform well," he said. "And you know what's going to happen? They're going to close those stores, and it's all going to end up being Neiman Marcus. Because they don't have scale, and they're using the same buying team for both, which is completely ridiculous."

He pointed to the closure of Saks' Chicago store on Michigan Avenue, which for decades operated across the street from a thriving Neiman Marcus. "It's crazy not to have a major store on Michigan Avenue," Appel said. "They might think that by closing Saks, maybe they'll get a lot of customers going to Neiman's, but they're different customers. So I think that's baloney. They don't want to make the investment. They're not taking the long term view."

At Exemplar, luxury demand, full-price selling, inventory management, vendor relationships and cash generation will all face scrutiny, McMahon said. Appel expects Saks to keep shedding share to Nordstrom and Bloomingdale's.

"Strong holiday sales would help, but sales alone will not resolve the larger question: can Saks generate sufficient cash to support its financial obligations and make the combined business work?" McMahon said. "A weak season could intensify pressure on an already complicated turnaround."