Kohl’s (NYSE:KSS) reported fourth quarter fiscal 2025 results that reflected continued progress on expense and inventory management, even as sales trends weakened late in the period. Management said comparable sales fell 2.8% in the quarter, while adjusted diluted earnings per share rose to $1.07, which the company described as “well ahead of last year,” supported by disciplined inventory and cost controls. The retailer also ended the year with a higher cash balance and no borrowings on its revolving credit facility.
Fourth-quarter sales pressured by seasonal execution and holiday value messaging
CEO Michael Bender said Kohl’s was “not pleased” with the top-line performance in Q4 as comparable sales decelerated. He noted severe winter weather contributed about 70 basis points to the comp decline, with roughly half of stores closed during winter storms toward the end of January.
- Fall seasonal execution: Bender said softness in fall seasonal exposed operational issues with inventory depth and allocation, particularly in smaller-format stores. Kohl’s “did not consistently have the right product in the right quantity in the right places,” which limited the ability to meet demand in key moments.
- Holiday promotional competitiveness: The company said it “needed to offer breakthrough pricing” during major shopping windows, including Black Friday, Cyber Monday, and the week after Christmas. Management said Kohl’s lost competitive ground during these periods and sees opportunity to regain share with stronger promotional statements aligned to value-conscious consumers.
While seasonal execution was a problem area, Bender said year-round businesses, including core basics and essentials, continued to post positive growth and were not impacted by the allocation issues.
Category highlights: proprietary brands, Sephora, and accessories
Bender said Kohl’s comparable sales improved 300 basis points versus last year, and he pointed to progress re-engaging Kohl’s Card shoppers. Management said the Kohl’s Card customer improved 120 basis points from the third quarter and is now “running down mid-single digits,” a notable improvement from declines in the mid-teens in the first half of the year. Non-card customers and new customer acquisition were described as strong.
In proprietary brands, the company said proprietary brands were down 3% overall in the quarter, with proprietary apparel flat and weakness largely in home. Management called out several areas of strength:
- Juniors: Juniors grew 8% in Q4, benefiting from investments in the proprietary brand SO. Kohl’s said it plans to build on this momentum in women’s, including introducing “Office Edit by SO.”
- Petites: Petites increased 26% year-over-year, supported by stronger in-store presence for proprietary brands LC Lauren Conrad and Simply Vera Vera Wang.
- Men’s and kids: Both posted positive comps in proprietary brands, led by FLX, Tek Gear, Jumping Beans, and Apt. 9.
In home, management said performance lagged due to softness in seasonal décor. Kohl’s said it “bought too deep,” limiting choice for different holiday celebrations, and said it needs sharper price points on key seasonal items.
Accessories remained a bright spot. Kohl’s said the Sephora business grew 2% in the quarter, with comparable sales improving to flat, aided by expanded holiday gifting sets and strength in fragrance and hair care (including brands such as YSL, Valentino, and OUAI). Excluding Sephora, accessories increased low single digits, while the company cited the expansion of “Impulse” to nearly all stores in Q3 as helping drive a more than 40% comparable sales increase versus last year. Jewelry posted positive performance, while footwear underperformed due to softness in active footwear and boots, partially offset by strength in dress and casual footwear.
2026 initiatives: assortment curation, value, and “trip assurance”
Looking to 2026, Bender said the company will continue focusing on “resetting our foundation,” with operational modernization and process improvements expected to remain a major focus for most of the year. Management outlined three priorities:
- Curated, more balanced assortment: Kohl’s said it plans to reduce redundancy and reinvest in higher-turning items, with increased investment in basics and “right-sizing” trending categories. In women’s, the company plans to broaden denim with national partners like Levi’s and proprietary brands such as LC Lauren Conrad and Sonoma. Men’s initiatives include expanded FLX offerings (including FLX Golf) and an “exclusive Haggar Hall of Fame launch.”
- Reestablish leadership in value and quality: Management said it will simplify promotional statements and deploy more personalized real-time offers. Kohl’s also plans increased investment in proprietary opening price point brands and is supporting proprietary brands with a “By Kohl’s” marketing campaign. On the call, Bender said the campaign has already launched and is intended to better showcase Kohl’s proprietary brand portfolio across stores and digital.
- Frictionless omni-channel experience: A key goal is restoring “trip assurance” through higher inventory depth and improved in-stock levels, while curating choice counts. Bender said Kohl’s plans to increase depth in the high single digits, protect replenishment receipts, and improve allocation to support BOPUS, BOSS, and ship-from-store. The company also discussed modernizing digital capabilities, including personalization, search and findability, and upgrading data architecture for future AI-driven technology.
Management also discussed additional in-store initiatives aimed at driving incremental purchases, including a “Deal Bar” and “Impulse Toy Tower,” both designed around items priced under $10 and intended to support seasonal moments such as Valentine’s Day, Easter, and Mother’s Day.
Margins, cash flow, and balance sheet improvements
CFO Jill Timm said net sales declined 3.9% in Q4 and 4% for the year. Comparable sales fell 2.8% in the quarter and 3.1% for the year, driven primarily by fewer store transactions. Digital sales grew low single digits in Q4 and were flat for the year, with higher traffic offset by lower conversion.
Gross margin expanded 25 basis points in Q4 to 33.1% of sales, driven by lower clearance markdowns from strong inventory management, partially offset by higher shipping costs as digital penetration rose to 35% of sales for the quarter. SG&A fell $76 million, or 4.9%, in Q4, which Timm attributed to lower store, marketing, and fulfillment expenses.
Kohl’s ended the year with $674 million in cash and cash equivalents, up $540 million from 2024, while inventory decreased about 7% year-over-year. Operating cash flow was $1.4 billion for the full year, up $700 million from 2024. Timm said the company fully exited its revolver with no borrowings and repurchased $87 million of long-term debt at a discount during the quarter.
2026 guidance: sales down 2% to flat, EPS $1.00 to $1.60
For fiscal 2026, Kohl’s guided for net sales and comparable sales in a range of a 2% decrease to flat versus 2025, with operating margin of 2.8% to 3.4% and earnings per share of $1.00 to $1.60. Timm said the outlook reflects confidence in executing initiatives while remaining cautious due to macroeconomic uncertainty and continued pressure on low- to middle-income consumers.
Additional guidance included:
- Other revenue: expected to decline 4% to 6%, primarily due to lower accounts receivable balances tied to weaker credit customer sales in 2025. Timm noted credit revenue tends to lag sales trends due to billing timing.
- Gross margin: expected to be flat to down slightly, reflecting higher proprietary brand sales offset by increased digital sales and elevated promotional offers as Kohl’s pushes value.
- SG&A: expected to be down 0.5% to 1.5%, driven by lower store payroll, marketing, and supply chain costs.
- Capex and inventory: capital expenditures of $350 million to $400 million, with inventory down low- to mid-single digits.
Timm said the company expects sales to build throughout the year, with first-quarter comparable sales expected to be down low single digits, noting that investments and merchandising improvements will take time to impact results.
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.
