Retail stocks popped in December as rumors spread that retailers were in the middle of their best holiday season in recent memory. Now, retailers are starting to report holiday sales numbers, and they are indeed quite good. But one retailer who is shining is Kohl’s Corporation(NYSE:KSS), and KSS stock has followed suit.

The off-price, off-mall retailer reported that comparable sales rose a sizzling 6.9% in November and December. That makes 2017 the company’s best holiday season in three years.

The 6.9% rise in comps is also much better than what peer department stores reported last week. J C Penney Company Inc (NYSE:JCP) said comparable sales during the holiday period rose 3.4%. Macy’s Inc (NYSE:M) said comps rose 1.1%. Kohl’s near 7% comp puts JCP and M’s numbers to shame.

Consequently, KSS stock is up more than 5% to trade at its highest level since mid-2015.

Time to fade the rally? I think so.

KSS Stock Is a Retail Winner

Kohl’s holiday numbers underscore that the company is certainly one of the biggest winners in the resurgent retail market.

Kohl’s naturally benefits by being off-price and off-mall. Off-price retail has yet to be eaten alive by digital commerce because it has a distinct price advantage. Off-mall also has yet to be eaten alive by digital commerce because while malls may be dying, shopping in general is not dying.

But Kohl’s is also winning because the company is fully capitalizing on the hottest trends in retail.

Firstly, the off-price retailer recently revamped its beauty department. That is a big step because cosmetics has been one of the hot spots in retail recently. This is a secular growth market supported by trends in photo-first social media apps. So long as this trend stays in place, Kohl’s has a compelling opportunity to position itself as a go-to, off-price destination for cosmetics.

Secondly, Kohl’s is advancing its partnership with Under Armour Inc (NYSE:UAA). This is also a big step because athletic apparel, like cosmetics, has been one of the hot spots in retail recently. Again, Kohl’s has a compelling opportunity to position itself as a go-to, off-price destination for athletic apparel.

Lastly, Kohl’s has a unique partnership with Amazon.com, Inc. (NASDAQ:AMZN) wherein Amazon is selling its smart home products in Kohl’s stores. Smart home products, like athletic apparel and cosmetics, have been hot sellers recently.

With a smart home offering alongside an expanded athletic apparel offering and revamped beauty department, Kohl’s positioned itself for a big 2017 holiday season. Those gains will likely continue in 2018, as secular trends continue to push forward the popularity of cosmetics, athletic apparel and smart home.

But KSS Stock Is Maxed Out

But I remain tethered by the valuation on KSS stock.

Comparable sales did rise by nearly 7% in November and December, but that is an anomaly. Before that, comps were down roughly 1% year-to-date. In other words, this isn’t a 5-10% growth story. Its a 0-5% growth story.

Margins are expanding and buybacks are in the pipeline, but at best, this is a 5-10% earnings growth story over the next several years.

At the midpoint, that is 7.5% earnings growth. I can understand paying roughly 14-times earnings for 7.5% growth. That would be an 85% growth premium, which is the same premium the market is trading at (20.8-times this year’s earnings for 11.3% multi-year growth prospects).

But KSS stock is trading at more than 14-times this year’s earnings, meaning it offers you less bang for your buck than the broader market. So either you think Kohl’s can grow earnings in excess of 7.5% per year over the next 2 years, or Kohl’s stock is starting to look like more risk than reward at these levels.

Bottom Line on KSS Stock

I love what Kohl’s is doing as a company. They have capitalized on the hottest trends in retail to the tune of its best holiday season in multiple years.

But Kohl’s stock price fully reflects expectations for this off-price retailer to continue to be a winner for the next several years.

Consequently, now feels like a good time to fade the rally.

As of this writing, Luke Lango was long ADBE, AMZN, and M.