In a challenging macroeconomic environment, a slight decrease in both quarterly sales and earnings is still a sign of progress for Menomonee Falls-based Kohl’s, which reported its second-quarter results Wednesday.
The retailer recorded net sales of $3.3 billion, down 0.9% year-over-year, with comparable sales also down 0.9%. Earnings were down 1.3% at $151 million, or $1.28 per diluted share, beating analyst expectations.
“We are confident that the work we are executing is leading us in the right direction,” said Michael Bender, CEO of Kohl’s. “Our second quarter results reflect the ongoing progress against our initiatives, leading to another improvement in our comparable sales trend. While we are encouraged with the momentum we have made thus far, we know there is critical work ahead of us.”
Kohl’s during Q2 received about $150 million in tariff refunds from the federal government, which drove an increase in gross margin and allowed the company to adjust its full-year guidance. Adjusted operating margin for the year is now expected in the range of 3.5% to 4.0%, compared to previous expectations of 2.8% to 3.4%. Kohl’s is now forecasting both net sales and comparable sales for fiscal 2026 to be flat to down 1.5%, an adjustment from a prior range of flat to down 2%.
The tariff refund was reinvested “directly into our core business initiatives,” including keeping prices low and reducing inventory as well as marketing and store apparel, said CFO Jill Timm.
Kohl’s continues its turnaround efforts against the backdrop of a challenging macroeconomic environment — one that has put a strain especially on the company’s core low-to-middle income customer base. Leadership expects economic conditions to remain for the rest of the year.
“Our customers are experiencing persistent financial pressures from inflation in their everyday expenses, like gas and food,” said Bender. “While their day-to-day priorities may change, the consumer is consistently looking for value, a compelling assortment, and an inspiring experience.”
Although top-line sales declined, there were some bright spots in the company’s performance in Q2, including a 2.8% increase in digital sales, a 1% increase in Kohl’s Card customer sales, a 3% increase in its proprietary brands and 1% increase in the home category. Juniors also delivered a 10% sales increase. Its kids business was flat.
On the other hand, the Sephora at Kohl’s business, which has emerged as a consistent sales driver for the company since 2022, faced “headwinds” during the second quarter, with sales down 4%. The decline was attributed to the impact of expanded distribution for several key brands, the company said. Softer performance in the category is expected as new brands reach full scale and distribution issues are sorted. Excluding Sephora, the accessories business increased mid-single digits, driven by newness, and impulse and jewelry, said Bender. Jewelry is a category Kohl’s added back into stores last year after scaling back with the addition of Sephora shop-in-shops, and the company expects the category to continue performing well heading into the holiday season.
The company also announced it is resuming its share repurchasing program after four years, with plans to buy back approximately $100 million in stock in 2026.
“After years of management turmoil and declining sales, there are signs, such as rising credit card sales, that efforts to improve merchandising and inventory management, elevate customer experience, deliver value and use promotions more efficiently are working,” said Morningstar analyst David Swartz in a report on Kohl’s Q2 earnings.
Kohl’s released its Q2 earnings amid changes in the C-suite. The company announced Tuesday that is has promoted chief digital officer Arianne Parisi to chief customer officer. The newly created position eliminates the position of chief marketing officer, currently held by Christie Raymond, who will leave the company on Sept. 9.
