Press release·09/03/2026 22:12:23

Kohl’s Navigates Challenging Retail Environment with Focus on Value and Omnichannel Experience

Kohl’s, a leading department store retailer, has remained committed to driving long-term shareholder value by providing customers with great products, value, and shopping experiences. The company’s three key initiatives are: offering a curated and balanced product assortment, reestablishing Kohl’s as a leader in value and quality, and delivering a seamless omnichannel shopping experience.

Financial Performance Overview

In the second quarter of fiscal 2026, Kohl’s reported total revenue of $3.515 billion, a decrease of 0.9% compared to the same period in the prior year. Net sales, which include revenue from merchandise sales and shipping, decreased 0.9% to $3.318 billion. The decrease in net sales was driven by an equal decline in both average transaction value and transaction volume.

On a year-to-date basis, total revenue decreased 1.4% to $6.682 billion, while net sales declined 1.2% to $6.316 billion. The year-to-date decrease in net sales was primarily due to a 2% decline in transaction volume, partially offset by a 1% increase in average transaction value.

Kohl’s comparable sales, which measure the performance of stores and digital channels open for at least 12 months, decreased 0.9% in the second quarter and 1.0% year-to-date. Digital sales, which include all online and mobile transactions, increased 2.8% in the second quarter and 3.4% year-to-date, representing 27% and 26% of net sales, respectively.

Gross Margin and Expenses

Gross margin, calculated as net sales less cost of merchandise sold, increased to 43.0% of net sales in the second quarter and 41.5% year-to-date, up 305 and 162 basis points, respectively, compared to the prior year. The improvement was driven by tariff refunds, partially offset by repayments to vendors and investments to drive value for customers.

Selling, general, and administrative (SG&A) expenses decreased $11 million, or 0.9%, in the second quarter and $30 million, or 1.3%, year-to-date. As a percentage of total revenue, SG&A remained flat in the second quarter and deleveraged by 6 basis points year-to-date. The decreases were primarily due to expense savings across stores, corporate, and credit operations.

Other expenses, including depreciation and amortization, decreased in the second quarter and year-to-date periods due to lower capital spending. In the prior year second quarter, the company recognized $11 million in impairment, store closing, and other costs, as well as a $129 million gain from the settlement of a credit card interchange fee lawsuit.

The effective tax rate was 23.3% in the second quarter and 24.1% year-to-date, compared to 23.8% and 25.0% in the respective prior-year periods.

Non-GAAP Adjustments

In the prior year second quarter and first half, Kohl’s reported certain non-GAAP financial measures that excluded the impact of impairment, store closing, and other costs, as well as the gain from the credit card lawsuit settlement. These adjustments were made to provide a more representative view of the company’s core business performance. No such adjustments were necessary for the current year results.

Inflation, Global Economic Conditions, and Trade Policies

Kohl’s operations continue to be influenced by general economic conditions, including inflation in areas such as fuel, energy, and merchandise sourcing costs, as well as the impact of tariffs. The company paid approximately $190 million in tariffs under the IEEPA (International Emergency Economic Powers Act) during fiscal 2025 and early 2026.

Following a U.S. Supreme Court ruling that struck down certain IEEPA tariffs, Kohl’s submitted claims seeking approximately $185 million in refunds, of which it has received $150 million as of the second quarter of 2026. The remaining refund claims are subject to ongoing uncertainty regarding timing, amount, and ultimate receipt.

To mitigate the impact of tariffs, Kohl’s took proactive measures, such as leveraging its diverse factory network, adjusting orders based on pricing elasticity, and collaborating with suppliers. However, the global trade environment remains fluid, and further tariff-related actions could continue to affect the company’s merchandise costs, availability, and operational results.

Liquidity and Capital Resources

Kohl’s capital allocation strategy focuses on investing in the business for long-term profitable growth, paying a quarterly dividend, reducing debt, and returning excess cash to shareholders through share repurchases.

In the first half of 2026, the company generated $478 million in cash from operating activities and used $153 million for investing activities, primarily for capital expenditures. Financing activities used $178 million, including $28 million in dividend payments and $113 million in debt repurchases.

Kohl’s period-end cash and cash equivalents balance increased to $821 million as of August 1, 2026, from $174 million in the prior-year period. This includes $682 million in short-term investments, which are managed to preserve principal and liquidity.

The company plans to invest approximately $350 to $400 million in capital expenditures in 2026 to support its strategic priorities. Kohl’s also resumed its share repurchase program, with plans to buy back approximately $100 million in stock during the year.

As of August 1, 2026, Kohl’s corporate credit ratings were B2 (Moody’s), B+ (S&P), and BB- (Fitch), with a positive, stable, and negative outlook, respectively. The interest rate on the company’s 3.375% notes due in 2031 is subject to a coupon adjustment provision based on its credit ratings.

Kohl’s senior secured, asset-based revolving credit facility includes financial and other covenants, which the company was in compliance with as of the end of the second quarter.

Outlook and Conclusion

Kohl’s remains focused on executing its strategic initiatives to provide customers with great products, value, and shopping experiences across its omnichannel platform. The company continues to navigate a challenging retail environment, marked by inflationary pressures, global trade uncertainties, and evolving consumer preferences.

Despite the headwinds, Kohl’s has demonstrated its ability to adapt and maintain financial discipline, as evidenced by its improved gross margin performance, expense management, and strong liquidity position. The company’s investments in its business, balanced capital allocation approach, and ongoing efforts to enhance the customer experience position it to navigate the current environment and drive long-term shareholder value.