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KOHLS Corp (KSS)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 2026 results were ahead of internal expectations: total revenue $3.23B, net sales $3.05B, gross margin 39.9%, diluted EPS of ($0.13) as comparable sales fell 3.9%; management affirmed full-year 2025 guidance .
  • Versus S&P Global consensus, Kohl’s delivered a beat: revenue $3.23B vs $3.06B consensus and EPS ($0.13) vs ($0.22) consensus; both represent positive surprises driven by category mix and inventory discipline (values from S&P Global)* .
  • Strategic actions continued: coupon eligibility expanded, proprietary brands rebalanced, and Sephora/in-store impulse initiatives progressed; CEO transition occurred May 1 and debt maturities were addressed via $360M 10% secured notes due 2030 .
  • Guidance held in Q1 with net sales down 5–7%, operating margin 2.2–2.6%, EPS $0.10–$0.60, capex $400–$425M, $0.125 quarterly dividend; subsequently raised on an adjusted basis in Q2 (adjusted OPM 2.5–2.7%, adjusted EPS $0.50–$0.80) .

What Went Well and What Went Wrong

  • What Went Well

    • Gross margin expanded 37 bps YoY to 39.9% on category mix and inventory management; SG&A fell 5.2% and leveraged ~32 bps vs prior year .
    • Sephora net sales +6% and comparable sales +1%; impulse queue lines rollout progressing, driving higher units per transaction .
    • Jewelry sales +10% and Petites up high teens after reintroductions; accessories comps +4% (ex-Sephora) and juniors down just 1%, benefiting from store adjacency changes near Sephora .

  • What Went Wrong

    • Comparable sales declined 3.9%, with net sales down 4.1% to $3.05B; digital sales underperformed, down 7.7% due to mix (home) and pressured core Kohl’s card customer .
    • Continued pressure on middle- and low-income customers drove trade-down into lower AUR goods, restraining average ticket even as units per transaction improved .
    • Credit-related revenue decreased (shift to “Other revenue” accounting), and digital profitability lagged stores due to shipping costs despite disciplined cost control .

Financial Results

MetricQ3 2025 (Nov 2, 2024)Q4 2025 (Feb 1, 2025)Q1 2026 (May 3, 2025)
Total revenue ($USD Billions)$3.71 $5.40 $3.23
Net sales ($USD Billions)$3.51 $5.18 $3.05
Gross margin (%)39.1% 32.9% 39.9%
SG&A ($USD Billions)$1.29 $1.54 $1.16
SG&A (% of total revenue)34.8% 28.5% 36.0%
Operating income ($USD Millions)$98 $126 $60
Operating margin (%)2.7% 2.3% 1.9%
Diluted EPS ($)$0.20 $0.43 ($0.13)
Comparable sales YoY (%)(9.3%) (6.7%) (3.9%)
Net sales YoY (%)(8.8%) (9.4%) (4.1%)

  • Estimate comparison (S&P Global consensus)*
    | Metric | Q1 2026 Actual | Q1 2026 Consensus | Surprise | |--------|-----------------|-------------------|----------| | Total revenue ($USD Billions) | $3.23 | $3.06* | Beat | | Diluted EPS ($) | ($0.13) | ($0.22)* | Beat |

  • Q1 2026 KPIs
    | KPI | Q1 2026 | |-----|---------| | Stores comparable sales | (2.6%) | | Digital sales growth | (7.7%) | | Sephora net sales | +6% | | Sephora comps | +1% | | Jewelry sales | +10% | | Petites sales | High-teens growth | | Inventory | $3.14B | | Operating cash flow | ($92)M | | Revolver outstanding | $545M |

Guidance Changes

MetricPeriodPrevious Guidance (Mar 11, 2025)Current Guidance (May 29, 2025)Change
Net sales YoYFY 2025(5%) to (7%) (5%) to (7%) Maintained
Comparable sales YoYFY 2025(4%) to (6%) (4%) to (6%) Maintained
Operating marginFY 20252.2% to 2.6% 2.2% to 2.6% Maintained
Diluted EPSFY 2025$0.10 to $0.60 $0.10 to $0.60 Maintained
Capital expendituresFY 2025$400–$425M $400–$425M Maintained
Dividend (quarterly)FY 2025$0.125 (declared Apr 2) $0.125 (declared Jun 25) Maintained
Debt maturitiesFY 2025Intend to refinance July 2025 maturities Refinancing executed via $360M 10% notes due 2030 (pricing May 15) Executed/refinanced
  • Subsequent update (Q2 2026): Raised outlook on adjusted basis
    | Metric | Period | Prior (Q1) | Updated (Aug 27, 2025) | Change | |--------|--------|------------|-------------------------|--------| | Adjusted operating margin | FY 2025 | N/A | 2.5% to 2.7% | Raised (on adjusted basis) | | Adjusted diluted EPS | FY 2025 | N/A | $0.50 to $0.80 | Raised (on adjusted basis) |

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2025, Q4 2025)Current Period (Q1 2026)Trend
Proprietary brands & valueShift back to private brands, increase in-transit inventory to support private labels; elevate value proposition Sequential improvement with proprietary brands ~400 bps better than Q4; plan to introduce new home brands; private brands still underperform company average but improving Improving penetration and margin tailwind
Sephora & impulseSephora strong growth; Babies “R” Us added; impulse queues expanded Sephora net sales +6% and comps +1%; impulse rollout to 613 stores by Q3 to drive UPT Continued growth, less new-opening tailwind
Store layout & adjacenciesReposition juniors next to Sephora; drive cross-shopping Accessories comps +4% (ex-Sephora) and juniors down 1% helped by adjacency changes Early positive impact
Digital underperformanceHigher digital penetration weighed on margins in Q3; Q4 cleanup Digital sales down 7.7% given home mix and weaker core card customer; profitability still below stores due to shipping costs Underperforming but improving sequentially
Supply chain/inventory disciplineInventory management supported margin expansion Gross margin +37 bps YoY on category mix and inventory management; restoring trip assurance/in-stock basics Sustained margin focus
Tariffs/macroConsumer discretionary pressure noted Diversified sourcing; moving production; adjusting orders based on price elasticity; expect to mitigate majority of tariff pressure within guidance Manageable with mitigation
Store portfolioQ4 included closures; optimization ongoing 24 stores closed in Q1; annual portfolio “hygiene”; focus on ~55k sqft prototype vs 35k Optimizing footprint
Credit & Other revenueCredit expense shifting to Other revenue noted Other revenue down 10% on servicing shift; credit revenue pressure tied to weaker card customer sales Accounting shift weighs on Other revenue

Management Commentary

  • “Our first quarter performance was ahead of our expectations and the actions we are taking are starting to make progress with early signs of a positive impact.” — Interim CEO Michael Bender .
  • “Gross margin in Q1 was 39.9%, an increase of 37 basis points… driven by category mix benefits and continued inventory management.” — CFO Jill Timm .
  • “We began our initial phase to move more brands to be included in our coupons… early reads show our customers are responding positively, especially in our digital business.” — CFO .
  • “We believe we can achieve our financial guidance for the year… comparable sales down 4–6%, operating margin 2.2–2.6%, and diluted EPS $0.10–$0.60.” — CFO .
  • “We intend to use the net proceeds [from $360M 10% notes due 2030]… resulting in the repayment of borrowings under its revolving credit facility… to repay all of its 4.25% notes due in July 2025.” — Debt offering release .

Q&A Highlights

  • Guidance and tariffs: Management held FY guide despite Q1 beat due to uncertainty; outlined tariff mitigation via diversified sourcing, order adjustment in elastic categories, and vendor collaboration .
  • Sephora trajectory: Chain rollout completed; comps moderating as program matures, but share gains persist; near-term focus on fragrance, hair, makeup (e.g., Glossier), Father’s Day exposure .
  • Digital profitability: Sequential improvement vs Q4; still less profitable than stores due to shipping; expect progressive improvement tied to core card customer recovery and coupon inclusion .
  • Store actions: Annual “hygiene” closures (~2% of fleet); flexibility with ~80 leases per year; focus on 55k sq ft format; relocations and downsizing to elevate productivity .
  • Private label penetration: Rule of thumb—+100 bps penetration adds 10–15 bps to margin; current private penetration ~30% with room to increase amid value focus .

Estimates Context

  • Q1 2026 comparison to S&P Global consensus*: revenue $3.23B vs $3.06B consensus (beat); EPS ($0.13) vs ($0.22) consensus (beat). Inventory discipline and mix supported gross margin expansion; coupon inclusion and private-brand resets should lead analysts to modestly raise gross margin assumptions while keeping cautious top-line trajectories given pressured consumer and digital softness .

Note: Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Margin resilience amid sales pressure: Category mix and inventory management expanded gross margin; proprietary-brand rebalancing offers ongoing margin tailwinds .
  • Demand recovery hinges on core card customer: Reintroducing jewelry/petites and coupon eligibility aims to regain wallet share of pressured core customer; monitor Q2/Q3 comp cadence .
  • Sephora/Impulse are structural drivers: Sephora nearly $2B business; impulse expansion boosts UPT and basket size; watch for sustained cross-shopping effects .
  • Liquidity/maturity profile improved: $360M 10% secured notes push nearest maturity to 2029; revolver usage expected to decline as cash rebuilds .
  • Guidance conservative but intact: Affirmed FY guide in Q1; subsequently raised on adjusted basis in Q2—signals disciplined execution with room for upside if consumer stabilizes .
  • Execution risk remains: Digital underperformance and macro tariff fluidity present headwinds; mitigation plans in place but require monitoring .
  • Near-term trading catalysts: Coupon inclusion rollout by mid-August (back-to-school), private-brand newness flow, Father’s Day fragrance push, Q2/Q3 gross margin progression, and any tariff developments .
Footnotes:
* Values retrieved from S&P Global.

Citations:
Press release/8-K Q1 2026: **[885639_0001193125-25-129976_d56046dex991.htm:0]** **[885639_0001193125-25-129976_d56046dex991.htm:2]** **[885639_0001193125-25-129976_d56046dex992.htm:3]**
Earnings call transcript Q1 2026: **[0000885639_2282627_2]** **[0000885639_2282627_3]** **[0000885639_2282627_4]** **[0000885639_2282627_5]** **[0000885639_2282627_6]** **[0000885639_2282627_7]** **[0000885639_2282627_8]** **[0000885639_2282627_9]** **[0000885639_2282627_10]** **[0000885639_2282627_11]** **[0000885639_2282627_12]** **[0000885639_2282627_14]**
Debt & dividend press: **[885639_1e14d256bf3d4bcdb06e94ede83ba49b_0]** **[885639_d99ea322865540d5bce29b891ce1a25a_0]**
CEO transition press: **[885639_abd8518492be40d1980d417c52cdeef5_0]**
Prior quarters: Q4 2025 (8-K): **[885639_0001193125-25-051424_d891597dex991.htm:0]** **[885639_0001193125-25-051424_d891597dex991.htm:5]** **[885639_0001193125-25-051424_d891597dex992.htm:2]** **[885639_0001193125-25-051424_d891597dex992.htm:3]**; Q3 2025 (8-K): **[885639_0001193125-24-265606_d881588dex991.htm:0]** **[885639_0001193125-24-265606_d881588dex991.htm:3]** **[885639_0001193125-24-265606_d881588dex992.htm:0]** **[885639_0001193125-24-265606_d881588dex992.htm:1]** **[885639_0001193125-24-265606_d881588dex992.htm:2]**
Q2 2026 (8-K): **[885639_0001193125-25-189105_d42370dex991.htm:0]** **[885639_0001193125-25-189105_d42370dex991.htm:1]** **[885639_0001193125-25-189105_d42370dex991.htm:4]** **[885639_0001193125-25-189105_d42370dex992.htm:3]** **[885639_0001193125-25-189105_d42370dex992.htm:4]**