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Takeaway: Quick thoughts on a big number. Will be back tonight with a detailed playbook.

1) We were expecting a release from KSS this week, with a best case comp of 3%. The company came in at 3.7%, with solid flow through to EPS with growth of 15%. Assuming SGA was up 1%, it suggests flat gross margin (which makes sense given flat inventory coming out of 3Q). Simply put, this is the first time in 13 quarters that KSS comped positive in its stores (about 0.7% assuming 25% dot com growth). 

2) One X factor this quarter is last year's January washout. KSS comps were -8%, assuming a 14% weight for the month. To be fair, we completely knew about this, and thought we modeled it appropriately. And Macy's had an even greater impact with -10% last Jan, and it put up a 2% owned comp last night for the quarter which implies a 1.5% comp for January. KSS is the rare standout. 

3) The big tell for us will be JCP.  If JCP comps somewhere in the low single digits, then we have some very serious questions to ask and answer, as it will suggest that there's something that KSS is doing to separate itself from the pack. If JCP comps high single, KSS trades down as the 'could I be wrong with the structural short call' concern abates. 

4) To play devil's/bull's advocate, we'd say that the change in the rewards program at KSS caused an increase in loyalty and store traffic that will help the company finally comp sustainably positive for the first time in 3 years. 

5) We think that logic is fundamentally flawed -- and the company's choice to decouple the credit card from the rewards program will ultimately sustain traffic, but will jeopardize a 400mm sg&a offset (9.5% of SG&A) that KSS receives from Capital One and books as a counter cost. This will play out over the course of 2015. 

Finally, while this seems even more counter consensus today than when we made the call, we still think that that FY15 will be the last year KSS will earn better than $4 per share 

If the market freaks out (as it appears to be) we'd short more based on what we know today. On the road this morning. Will return with a detailed playbook later this evening.