Updated 5:08 p.m. ET April 27
Turnaround efforts at Kohl’s, after months and months of work, appear to be starting to pay off.
On Wednesday, Kohl’s reported second-quarter margin gains, expense reductions and merchandise improvements, and lifted its profit forecast for 2025, though there were still sales declines.
Net income at the Menomonee Falls, Wisc.-based family-oriented value chain rose to $153 million in the quarter ended Aug. 2, from $66 million in the year-ago quarter. Adjusted net income last quarter slipped to $64 million, or $0.56 per diluted share, from $66 million, or $0.59 per diluted share, in the year-ago quarter.
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Net sales decreased 5.1 percent to $3.35 billion last quarter compared to $3.53 billion in the year-ago period. Comparable sales declined 4.2 percent.
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Gross margin increased 28 basis points, driven by greater penetration of proprietary brands, category mix benefits and improved inventory management, the retailer reported.
SG&A expenses declined 4.1 percent compared to last year benefiting from what the company said was tightly managed expenses primarily in stores and marketing.
Kohl’s now expects annual earnings per share of 50 cents to 80 cents for 2025, compared to its previous forecast of 10 cents to 60 cents. Sales are seen declining 5 to 6 percent, while comparable sales are seen dropping 4 to 5 percent.
Wall Street really liked Kohl’s second-quarter report, pushing the stock price up 24 percent to $16.17 on Wednesday.
“Kohl’s second-quarter performance is a testament to the progress we are making against our 2025 initiatives,” Michael J. Bender, interim chief executive officer of Kohl’s, said in a statement Wednesday. “This resulted in sales performance that came in ahead of our expectations. While it is clear that these initiatives are beginning to resonate with our customers, our team remains focused on delivering progressive improvement throughout the remainder of the year against a challenging economic backdrop.
“In addition to our top-line progress, we managed the business with great discipline in the quarter,” Bender added. “We were able to expand our gross margins, reduce our inventory and lower our expenses, leading to solid second-quarter earnings. I continue to be impressed with our entire team at Kohl’s and I am thankful for all their hard work.”
Kohl’s merchants have been working hard to rearrange assortments and capitalize on best-performing categories. Among the recent accomplishments, last spring Kohl’s completed its rollout of Sephora to all stores in the chain, which the company indicated is on track to represent a $2 billion beauty business.
Growth was seen in jewelry after additional investments in fashion jewelry inventory were made, and there was improved performance in women’s as a result of increased investments in proprietary brands, a streamlining of choices in intimates, and a reintroduction of petites. The company said it built upon “strength of existing proprietary brands while finding opportunities to introduce new brands such as Miryana, Hotelier and Mingle & Co. in the home space.” Key proprietary brands in fashion include Sonoma, Simply Vera Vera Wang, Lauren Conrad and FLX.
Also, impulse queue lines, where customers pick up items as they line up to check out, were expanded to an additional 300 stores in the second quarter. The impulse category delivered 30 percent sales growth in the second quarter, Kohl’s indicated.
Kohl’s has also been working to make shopping easier for customers by simplifying its value messaging while expanding its coupon offers.
“Now, while it’s clear that these efforts are beginning to resonate with our customers, we also recognize that this performance is not yet where we aim to be,” Bender said during his conference call with investors and industry analysts. “Our entire team remains focused on enhancing the way we serve customers and over time returning the company to growth.
“Although we are encouraged by our second-quarter results and the improved sales trend we saw throughout the quarter, we also recognize that consumers continue to be pressured and are being choiceful with their purchases,” Bender added. “Specifically, our lower- to middle-income customers remain the most challenged, while our higher-income customers have proven to be more resilient. These lower- to middle-income customers continue to prioritize value and are trading down into lower opening price point products. Several of our key initiatives are focused on delivering greater value to these customers through investing in our proprietary brands and adding more coupon-eligible brands.”
For the turnaround effort, Bender cited three strategic priorities — offering a curated, more balanced assortment focused on the bestselling categories, reestablishing Kohl’s as a leader in value and quality, and delivering a “frictionless shopping experience across our omnichannel platform.”
Regarding Kohl’s women’s business, Bender said, “Although women’s slightly lagged the company performance, we saw steady improvement as our inventory investment in proprietary brands gained traction, ultimately delivering a positive comp in July.”
On petites, Bender said since the category was expanded to all stores, “this business accelerated up almost 40 percent in the second quarter. This strong performance was led by the introduction of our proprietary brands, Lauren Conrad and Simply Vera Vera Wang.”
On accessories, Bender commented that the category “continued to outperform the company by low-single digits in the quarter. This strength was driven by reestablishing our jewelry business and investing in key growth categories such as Impulse and our Sephora partnership. In Q2, our jewelry business ran plus 12 versus last year.”
In the second quarter, Sephora at Kohl’s grew 3 percent versus last year, and was flat versus the prior year on a comparable sales basis, Bender noted. “This partnership has delivered exactly as intended, benefiting both companies and has created an inspiring experience for Sephora at Kohl’s as a beauty destination,” he said.
Men’s and kids were the softest-performing categories in the quarter, with both experiencing declines in spring seasonal assortments like shorts and T-shirts, Bender said. “However, this softness was partially offset by stronger performance in opening price point proprietary brands such as Tek Gear and Jumping Beans. Our footwear business slightly underperformed the company, primarily due to softness in sandals and active footwear,” Bender said.
Commenting on the third quarter so far, Bender said, “We’re actually off to a good start here in the first month of the quarter.” For back-to-school, backpacks, kids, footwear and fleece have seen strong sales. “One of the interesting developments also is in denim. So especially on the fashion side of denim — anything baggy, wide leg. We’re also seeing proprietary brand strength in Lauren Conrad and Nine West.” Among national brands, he cited Levi’s in women’s, and Nike, in kids, women’s and footwear.
According to Emarketer vice president Suzy Davidkhanian: “Kohl’s reported better-than-expected earnings this quarter and the retailer raised its full-year outlook, even as comp sales fell 4.2 percent. The top-line beat gives management some breathing room, but Kohl’s is still stuck in the squeezed middle of retail — forced to discount heavily to move product while struggling to articulate a clear brand identity. Moves to right-size stores and seed new labels show progress, but extending vendor terms to conserve cash underscores a defensive posture.
“With holidays looming, promotions will draw traffic and keep sales moving, but add further margin pressure,” she added. “The key question for 2026 is whether AI investments can deliver corporate efficiencies and digital tools can help win back consumers in time to restore investor confidence.”