Kohl’s (NYSE:KSS) reported a 0.9% decline in comparable sales during its second quarter of fiscal 2026, an improvement from earlier trends, as the retailer highlighted gains in proprietary brands, Kohl’s Card sales, home, toys and digital. The company also raised its full-year outlook after receiving approximately $150 million in tariff refunds.
Chief Executive Officer Michael Bender said the quarter represented “another improvement in our comparable sales trend,” while operational discipline in expenses and inventory management strengthened the retailer’s balance sheet and cash generation. He said Kohl’s continues to serve consumers facing pressure from inflation in everyday costs such as gas and food, increasing the importance of value, relevant assortments and convenient shopping experiences.
Sales Trends Improve Across Key Categories
Store sales declined 2% in the quarter, while digital sales increased 2.8%. Kohl’s Card sales rose more than 1%, continuing a recovery that management attributed to targeted efforts to reengage loyalty customers as well as the return and expansion of categories and proprietary offerings. Timm said credit revenue, which declined 1% in the quarter, is now expected to track more closely with the company’s top-line performance rather than lag it.
Proprietary-brand sales increased 3%, supported by higher inventory depth and customer response to Kohl’s value-oriented brands. However, management said women’s proprietary-brand performance was constrained after stronger-than-expected early-quarter sell-throughs left the company unable to replenish inventory quickly enough. Kohl’s pulled forward fall receipts and made a larger inventory investment for the back half of the year.
Among categories, home delivered 1% sales growth, led by decor and small electrics. The company cited strength in brands including Shark, Ninja, KitchenAid and GreenPan. Kids was flat, though toys grew at a double-digit rate, driven by Lego, KPop Demon Hunters and value-focused toy displays. Juniors increased 10%, led by the SO brand and new product introductions.
Accessories were flat overall, but increased by the mid-single digits excluding Sephora at Kohl’s. Jewelry rose by the mid-single digits, and Kohl’s plans to add 350 fine-jewelry case lines in the fourth quarter, bringing the total to 549 stores. It will also install elevated fashion-jewelry fixtures in 320 stores by November.
Sephora at Kohl’s sales declined 4%. Bender said expanded distribution of several major brands pressured results, while newer brands have not yet reached enough scale to offset those declines. Kohl’s expects the softer Sephora performance to continue through the rest of the year, although it plans new launches across fragrance, haircare and skincare, as well as holiday outposts in 130 stores.
Inventory, Marketplace and Customer Experience Initiatives
Inventory declined approximately 3% from a year earlier, while receipts increased 7% in the quarter to support categories such as toys, jewelry and juniors. Kohl’s reduced choice count by the mid-teens while increasing inventory depth by the mid-single digits. The company expects year-end inventory to be down by low single digits.
Kohl’s Marketplace grew 88% year over year in the second quarter. Timm said that including Marketplace gross merchandise value, comparable sales would have declined only 0.2%, rather than 0.9%. The retailer is more than doubling its marketplace product and vendor selection this year to expand category coverage, address inventory gaps and support seasonal demand.
The company is also investing in its store and digital experiences. Store pickup now represents more than 20% of digital demand, while Kohl’s expanded same-day delivery through Instacart and launched a DoorDash partnership in July. Management said customers using its AI shopping assistant are showing higher conversion and revenue per visit, though adoption remains small.
Kohl’s said it is modernizing its digital platform, with most core customer journeys now moved to the new system. It also plans to add Klarna payment options ahead of the holiday season.
Capital Allocation and Raised Outlook
Kohl’s ended the quarter with $821 million in cash and cash equivalents and no borrowings under its asset-based lending facility. Timm said the company’s net cash position improved by more than $700 million from a year earlier.
The retailer repurchased $63 million of long-term debt during the quarter at a $6 million discount. Year to date, it has repurchased $113 million of debt at a $15 million discount. Kohl’s expects operating cash flow of roughly $950 million to $1 billion for the year and capital expenditures of $350 million to $400 million.
The company resumed share repurchases for the first time since 2022, planning to buy back approximately $100 million of stock in 2026 under its existing $3 billion authorization. It also returned $14 million through its quarterly dividend during the second quarter.
- Comparable sales guidance: down 1.5% to flat versus 2025
- Adjusted operating margin guidance: 3.5% to 4%
- Adjusted diluted EPS guidance: $1.80 to $2.40, including about $0.65 from tariff refunds
Timm said the updated outlook excludes any future tariff refunds. The company plans to use the current refund proceeds to support value-oriented pricing, opening-price-point proprietary brands, media spending and store staffing.
Kohl’s also announced leadership changes, including the appointment of Elliott Rodgers as chief operating officer effective Sept. 9 and Arian Parisi to the newly created role of chief customer officer.
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.
