Kohl’s Corp reported a second-quarter adjusted earnings per share of $1.28, exceeding estimates by 124.6%, but its stock fell nearly 7% in pre-market trading after the retailer posted a revenue miss and flagged concerns over the quality of its earnings.
The company’s gross margin expanded to 43.0% from 39.9% a year ago, driven largely by approximately $150 million in tariff refunds under the IEEPA program. Of that amount, about $100 million flowed through cost of goods sold, boosting margins by 305 basis points and contributing $0.65 per share to earnings. Comparable sales declined 0.9%, marking the third straight year of revenue declines, from $17.5 billion in 2023 to $15.5 billion in the latest period.
Management raised its full-year adjusted EPS guidance to a range of $1.80 to $2.40, up from the prior $1.00 to $1.60, explicitly incorporating the $0.65 per share benefit from tariff refunds. The company’s market capitalization stands at $2.00 billion, with a trailing twelve-month P/E ratio of 7.5x and a forward P/E of 12.9x. The dividend yield is 2.8%, though the stock’s fair value is assessed at a 12.8% downside to current levels.
Operational highlights included an 88% year-over-year increase in third-party marketplace revenue, contributing 65 basis points to comparable sales. Proprietary brands grew 3%, led by double-digit gains in juniors, toys, and activewear segments such as Tek Gear and FLX. The home category rose 1%, while store cardholder sales turned positive at 1.0%. Cash increased to $821 million, and long-term debt fell to its lowest level since 2007.
Capital allocation included $113 million in bond repurchases at a discount and the first share buyback since 2022, with $100 million authorized for the remainder of 2026. The Sephora shop-in-shop partnership, however, saw revenue decline 4% as brands expanded distribution to competitors like Ulta and Target. Management projects the partnership will approach $2 billion in revenue over four years.
Analysts remain cautious, with JPMorgan maintaining an Underweight rating and a $17 price target. Morgan Stanley and Bank of America also hold negative views on the stock.
Upcoming catalysts include the October 2026 Q3 earnings release, with estimates of $0.05 EPS and $3.39 billion in revenue, followed by the holiday season in Q4 FY2026, where EPS is projected at $0.94. Investors will monitor the durability of tariff refund benefits, the pace of marketplace scaling, and leadership execution amid recent transitions, including a newly appointed Chief Customer Officer and a departed CMO.
