Summary of Kohl's Corporation Q2 2026 Earnings Call

1Key Financial Results and Metrics

Comparable Sales:: Declined 0.9% in Q2 and 1% year-to-date.

Store Sales:: Down 2%, while digital sales increased by 2.8%.

Kohl's Card Sales:: Up 1% in Q2, reflecting improved customer engagement.

Gross Margin:: Improved by 305 basis points in Q2, aided by $150 million in tariff refunds.

Net Income:: $151 million in Q2, or $1.28 per diluted share; year-to-date net income was $137 million, or $1.18 per diluted share.

Cash Position:: Cash and cash equivalents were $821 million, with no borrowings on the ABL.

Debt Repurchase:: Retired $63 million of long-term debt in Q2, totaling $113 million year-to-date.

Capital Expenditures:: Expected to be $350-$400 million for the year.

2Strategic Updates and Business Highlights

Customer Engagement:: Positive momentum with Kohl's Card customers and proprietary brands, which saw a 3% increase in sales.

Product Assortment:: Enhanced inventory depth and proactive seasonal transitions, particularly in home decor and kids' categories.

Marketplace Growth:: Marketplace business grew 88% year-over-year, contributing positively to overall performance.

Operational Improvements:: Focus on expense management and inventory optimization, with a 3% reduction in inventory compared to last year.

3Forward Guidance and Outlook

Annual Guidance:: Comp sales expected to range from a 1.5% decrease to flat versus 2025, with adjusted operating margin projected at 3.5%-4%.

Earnings Per Share:: Adjusted EPS guidance raised to $1.80-$2.40, including a tariff refund benefit of approximately $0.65.

Inventory Management:: Anticipated to be down low single digits for the year, with a focus on meeting demand in key categories.

4Challenges and Points of Concern

Consumer Sentiment:: Customers remain financially pressured due to inflation in essential goods, impacting discretionary spending.

Sephora Performance:: Sales down 4% in Q2, facing headwinds from expanded distribution of major brands, affecting overall performance.

Women’s Business:: Moderated performance with a 1.5% decline; inventory constraints limited the ability to chase back demand.

Traffic Trends:: Slightly negative traffic, although showing improvement compared to previous quarters.

5Notable Q&A Insights

Kohl's Charge Customer Trends:: The rebound in Kohl's Charge customer spending is expected to positively impact proprietary brand sales and credit revenue.

Back-to-School Performance:: Strong momentum observed in July with early back-to-school receipts contributing to positive sales trends.

Traffic vs. Average Transaction Value (ATV):: Slight decline in ATV, but an increase in units per transaction indicates a shift towards value-driven purchases.

Competitive Landscape:: No significant deflation observed yet, but the company is prepared to adjust pricing strategies if necessary. Overall, Kohl's Q2 2026 results reflect a gradual recovery amid a challenging economic environment, with strategic initiatives aimed at enhancing customer engagement and operational efficiency. However, ongoing pressures from inflation and competitive dynamics present challenges that the company must navigate in the coming quarters.