Kohl's Q1 Earnings Call Highlights

Key Points

• Kohl’s said Q1 marked its strongest comparable sales performance in more than four years, though comps still fell 1.1% and net sales declined 1.7%. Management said the results reflect progress in resetting the business, tighter expense and inventory control, and better balance-sheet discipline.
• Proprietary brands and Kohl’s Card customers showed notable improvement, with proprietary brand comp sales up 6% and Kohl’s Card sales flat after recent declines. Strength was led by women’s, juniors and home, while men’s and footwear remained weaker.
• The company reaffirmed full-year guidance for fiscal 2026, even as it remains cautious about pressured low- to middle-income consumers. Kohl’s is banking on digital growth, store in-stock improvements, and tariff refunds to support results, while Sephora at Kohl’s and some store categories still need work.

Kohl's NYSE: KSS reported what executives described as its strongest quarterly comparable sales performance in more than four years, as the retailer cited gains in proprietary brands, improved inventory management and stabilization among its Kohl's Card customers.

On the company's first-quarter fiscal 2026 earnings call, Chief Executive Officer Michael Bender said comparable sales declined 1.1% from a year earlier, while net sales fell 1.7%. Bender said the quarter showed "progressive improvements" in the business and reflected Kohl's efforts to reset its foundation after several quarters of weaker trends.

"We are pleased with our start to 2026," Bender said, adding that the company continues to manage expenses, inventory and its balance sheet tightly. He said the results gave management "increased confidence" in its ability to execute against key initiatives, though he cautioned that the company remains realistic about the work ahead.

Proprietary Brands and Kohl's Card Customers Show Improvement

A central focus of the call was Kohl's proprietary brand portfolio, which Bender said rose 6% on a comparable sales basis in the quarter. He said the brands are resonating with customers because they offer quality products at affordable opening price points.

Bender highlighted strength in women's and juniors apparel, particularly the SO brand, which helped drive a 10% increase in the juniors business. He said Kohl's plans to expand SO into dress and casual categories through its Office Edit collection. Women's sportswear also performed well, supported by brands including LC Lauren Conrad and Sonoma.

Kohl's Card customers also stabilized, delivering a flat comparable sales performance after declining in the mid-single-digit range in the fourth quarter. Chief Financial Officer Jill Timm said that represented a 600-basis-point improvement from the prior quarter and was an important sign for one of the company's most productive customer groups.

"A lot of the efforts that we've been talking to you guys about for a year was really geared at getting back that customer," Timm said during the question-and-answer session. She said Kohl's had not lost the customer, but needed to encourage more frequent visits.

Category Performance Was Mixed

Bender said four lines of business delivered flat to slightly positive comparable sales in the first quarter: women's, kids, accessories and home. Seasonal spring merchandise was up in the mid-teens versus the prior year after Kohl's adjusted buying and supply chain processes following issues with fall seasonal inventory planning and allocation.

The kids business benefited from efforts to expand proprietary brands, including the rollout of FLX to kids in all stores by June, the introduction of the tween brand Sea + Skye and an expansion of Jumping Beans into baby and infant categories. Kohl's also plans to add 56 Babies R Us shop-in-shops this fall and expand baby gear gifting zones.

Accessories posted a flat comp, with impulse queuing lines up more than 50% in the quarter. The company said it is expanding fine jewelry to an additional 350 stores after a 200-store test and adding SO-branded fashion and hair accessories in the juniors department.

Home improved more than 400 basis points from the fourth quarter, helped by brands such as Shark and Ninja, as well as proprietary brands including Miryana and Mingle & Co. Home decor improved to a low-single-digit gain after Kohl's adjusted its seasonal decor strategy.

Men's and footwear underperformed the company average. Bender said men's should begin improving in the second quarter as assortment edits take hold, while footwear is expected to improve with newness and greater depth for back-to-school, including offerings from Nike and Adidas.

Digital Sales Rise, Stores Remain Under Pressure

Timm said digital sales grew 4% in the quarter, supported by increased traffic and investments to modernize the online shopping experience. Including marketplace gross merchandise value, comparable sales would have improved by about 50 basis points and declined 0.6%, she said.

By contrast, stores were down in the low single digits, primarily due to fewer transactions. Timm said Kohl's is addressing the weakness by investing in store inventory to improve in-stock levels and "trip assurance," while also elevating the in-store environment.

Bender said improving trip assurance is a key part of the company's omnichannel strategy. He said Kohl's is planning apparel depth up in the high single digits while reducing choice counts by a similar amount, with the goal of helping customers find the right size and color at an affordable price.

The company is also investing in digital tools. Bender said Kohl's recently launched an AI-powered gift finder on its website using Google Gemini and is working on more curated digital experiences, better product storytelling, clearer delivery information and easier returns. Kohl's also plans to more than double its marketplace item count this year.

Sephora at Kohl's Underperforms

Sephora at Kohl's was one area of softness, with the business down in the low single digits. Bender said fragrance and haircare remained the strongest categories, helped by brands such as KAYALI and Kérastase, while makeup and skincare underperformed.

Management said Kohl's plans to drive improvement through holiday gifting moments, new brands and social media campaigns. The company launched M·A·C in March, and Bender said it is scheduled for a full-store rollout later this year. Kohl's is also adding Korean skincare brands including Beauty of Joseon, Aestura and Biodance.

Guidance Reaffirmed as Balance Sheet Improves

Timm said gross margin improved four basis points from last year, helped by higher proprietary brand penetration and mostly offset by higher shipping costs tied to digital sales growth. Selling, general and administrative expenses declined $20 million, or 1.6%, due mainly to savings in credit and corporate expenses.

The company reported a net loss of $14 million, or $0.13 per diluted share. Interest expense declined $13 million, largely due to open market debt repurchases at a discount.

• Cash and cash equivalents totaled $429 million at quarter-end, with no borrowings on the asset-based lending facility.
• Inventory declined about 8% from a year earlier, while receipts were up 1%.
• Kohl's repurchased $50 million of debt at a $9 million discount during the quarter.
• The company returned $14 million to shareholders through its quarterly dividend.

Kohl's reaffirmed its fiscal 2026 outlook, calling for comparable sales to range from down 2% to flat versus 2025, operating margin of 2.8% to 3.4% and diluted earnings per share of $1.00 to $1.60. Timm said the guidance does not include any potential impact from tariff refunds. She said Kohl's submitted $140 million of claims in the first quarter related to tariffs paid as importer of record and is eligible for $190 million in total tariff refunds, though none were received during the quarter.

Management said the company remains cautious because its core low- to middle-income customer continues to face financial pressure and is selective with discretionary spending. Bender said Kohl's will continue to focus on value, proprietary brands and improving the shopping experience as it works through the rest of 2026.

About Kohl's NYSE: KSS

Kohl's Corporation, founded in 1962 by Maxwell Kohl and headquartered in Menomonee Falls, Wisconsin, is a leading American department store retailer. The company operates approximately 1,100 stores across 49 states, offering a combination of value-oriented pricing, private-label brands and national labels. Since its initial public offering in 1992, Kohl's has focused on broadening its product assortment and enhancing the in-store and online shopping experience.

The retailer's merchandise portfolio spans apparel, footwear, accessories, and beauty products for women, men and children, as well as home goods, kitchenware and seasonal décor.

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