Kohl's (KSS -6.09%) stock recorded explosive gains over the last week of trading. The company's share price rose 33.5% compared to its level at the previous Friday's market close -- a stretch that saw the S&P 500 index rise 1.5%.

While there was no major business-specific news for the company, its valuation surged thanks to meme-stock trading and a short squeeze. Even with the big rally this week, the retailer's share price is still down roughly 9% in 2025 and 56% over the last three years.

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Kohl's stock surges on meme-stock and short-squeeze momentum

Kohl's stock surged as it became a popular play among meme-stock traders, and the momentum helped spur a moderate short squeeze that helped push its valuation even higher. Due to consistent struggles facing the retailer, investors had placed significant bets against the company by selling its stock short. With the company's share price seeing a huge rally this week, short sellers were forced to buy back the stock they had lent out in short sales, which had the effect of pushing Kohl's stock even higher.

What's next for Kohl's?

Kohl's could continue to see bullish momentum connected to meme-stock trading in the near term, but the company's performance outlook is fraught. With its last update, Kohl's guided for sales to fall between 5% and 7% this year. Meanwhile, same-store sales are projected to fall between 4% and 6%, and the midpoint of the company's earnings target implies a roughly 64% annual decline in profitability.

As part of the meme-stock play, some investors have jumped into the stock with expectations that the company's commercial real estate holdings could be undervalued, but that looks like a risky investment thesis.