Kohl’s Corporation reported second-quarter net income of $151 million on Wednesday, more than doubling from $72 million a year earlier, as adjusted earnings per share surged to $1.28 from $0.56. The results exceeded analyst expectations of $0.57 per share but fell short on revenue, with net sales declining 0.9% to $3.32 billion against a $3.4 billion consensus.
Comparable sales fell 0.9%, including a 2.0% drop in store traffic and a 2.8% increase in digital sales, which now account for 27% of total revenue. Gross margin expanded by 305 basis points to 43.0%, driven by approximately $150 million in tariff refunds under the International Emergency Economic Powers Act. Of that amount, roughly $100 million reduced cost of merchandise sold, while the remainder supported inventory reduction and vendor partnerships.
Operating income rose to $261 million from $126 million in the prior-year period. Selling, general and administrative expenses declined 0.9% to $1.19 billion, holding steady at 33.8% of revenue. Merchandise inventories decreased 2.7% to $2.91 billion, and cash and cash equivalents increased to $821 million from $174 million.
Long-term debt fell to $1.33 billion, the lowest level since 2007, while lease liabilities totaled $5.1 billion. Adjusted for actual lease periods averaging four years, the adjusted leverage ratio improved to 1.8 times from 3.6 times unadjusted. The company repurchased $113 million of debt year-to-date at a $15 million discount.
Kohl’s operates 1,151 stores nationwide, serving over 60 million customers, with more than 20 million active app users. Its Sephora partnership spans over 1,100 locations, though category sales declined 4% in the quarter. Proprietary brands delivered a 3% comparable sales increase.
Michael Bender, CEO, stated that the quarter reflected "ongoing progress against our initiatives," adding that the company continues to "build a strong balance sheet through diligent operational focus."
For full-year 2026, Kohl’s maintained guidance for net sales to range from flat to down 1.5% versus 2025, with adjusted operating margin projected between 3.5% and 4.0%. Adjusted diluted EPS is expected to reach $1.80 to $2.40. The board declared a $0.125 dividend payable September 23, maintaining an annual payout of $0.50 per share. Share buybacks will resume after a four-year hiatus, with up to $100 million planned for repurchase in 2026 under a $3 billion authorization. Capital expenditures are projected at $350 million to $400 million for the year.
