Kohl's Corporation

Q2 comparable sales declined 0.9%, with store sales down 2% and digital sales up 2.8%. Net income was $151 million and adjusted earnings per diluted share were $1.28; year-to-date net income was $137 million and EPS was $1.18. Gross margin improved 305 basis points in Q2 and 162 basis points year-to-date, aided by approximately $150 million of tariff refunds in the quarter, with about $100 million benefiting cost of merchandise sold. SG&A declined 0.9% in Q2, inventory decreased about 3% year over year, cash and cash equivalents were $821 million, and the company had no borrowings on its ABL. Guidance for 2026 was raised to comp sales down 1.5% to flat, adjusted operating margin of 3.5% to 4%, and adjusted EPS of $1.80 to $2.40, including approximately $0.65 of tariff refund benefit. Capital spending is expected to be $350 million to $400 million, and management said it plans to resume buybacks with about $100 million of stock repurchases in 2026.

Michael Bender framed Q2 as another step in Kohl’s gradual turnaround, stressing improving comp trends, tighter inventory control, and better cash generation. He highlighted progress in proprietary brands, Kohl’s Card customers, seasonal timing, and omnichannel investments, while repeatedly noting that the consumer remains pressured by inflation and remains highly value-focused. His tone was cautiously optimistic: the company is making progress, but he stressed there is still more work to do and that the macro backdrop remains challenging.

Jill Timm focused on the numbers behind the progress: Q2 comp sales down 0.9%, gross margin up 305 basis points, SG&A down 0.9%, and net income of $151 million or $1.28 per diluted share. She said about $150 million of tariff refunds improved flexibility, with some proceeds reinvested into value, inventory, media, and store payroll; excluding tariffs, gross margin would have been up about 5 basis points, in line with guidance. She also noted cash and cash equivalents of $821 million, no ABL borrowings, inventory down about 3%, year-to-date capex of $146 million, and a planned 2026 capital spend of $350 million to $400 million, while reinstating buybacks and targeting about $100 million of repurchases in 2026.

Analysts pressed on the rebound in Kohl’s Card sales, the cadence of comps through the quarter, proprietary-brand inventory constraints, the EPS guide bridge, cash flow and capital allocation, Sephora trends, traffic, and whether deflation could pressure tickets. Management said the credit rebound reflects customers responding to proprietary brands, added categories like Jewelry and Petites, and coupon inclusion, and also helps credit revenue outlook. On the back half, they said momentum improved exiting July, they feel good about trends versus guidance, and they expect continued pressure at Sephora from expanded distribution until new brands scale; traffic was described as slightly down but the best in some time.