Summary of Kohl's Corporation Q1 2026 Earnings Call

1Key Financial Results and Metrics

Net Sales: Declined 1.7% year-over-year.

Comparable Sales: Decreased 1.1%, marking the best quarterly performance in over four years.

Digital Sales: Grew 4%, attributed to increased traffic and strategic investments in digital enhancements.

Gross Margin: Improved by 4 basis points, driven by higher sales of proprietary brands but offset by increased shipping costs.

SG&A Expenses: Decreased by approximately $20 million (1.6%).

Net Loss: $14 million, translating to a loss per diluted share of $0.13.

Cash Position: Ended the quarter with $429 million in cash, a significant improvement from $153 million year-over-year.

Inventory: Decreased by 8%, with a focus on maintaining a clean inventory position.

2Strategic Updates and Business Highlights

Customer Engagement: Stabilization of Kohl's card customer performance, with flat comparable sales, reflecting a 600-basis-point improvement from Q4.

Proprietary Brands: Increased 6% in comparable sales, with strong performances across women's, juniors, and kids' categories.

Operational Improvements: Adjustments made in inventory management and seasonal assortment planning led to a mid-teens increase in spring seasonal sales.

Omnichannel Enhancements: Continued focus on improving the shopping experience through inventory management and digital upgrades, including AI-powered gift finders.

Sephora Performance: Underperformed, particularly in makeup and skincare, but new brand rollouts are expected to improve results.

3Forward Guidance and Outlook

Comp Sales Guidance: Expected to range from a 2% decrease to flat compared to 2025.

Operating Margin: Projected between 2.8% and 3.4%.

Earnings Per Share: Forecasted between $1.00 and $1.60.

Investment Focus: Continued investment in proprietary brands and enhancing customer value offerings.

4Challenges and Points of Concern

Sales Decline: Overall net sales and transactions decreased, indicating potential challenges in customer traffic.

Sephora Underperformance: Continued struggles in certain categories may hinder overall growth.

Economic Pressures: The low to middle-income consumer remains financially pressured, which could impact discretionary spending.

Inventory Management: While inventory is clean, the need for ongoing adjustments in assortment clarity and depth remains critical.

5Notable Q&A Insights

Drivers of Improvement: Management attributed the sales improvement to successful proprietary brand strategies and better inventory management.

Customer Trends: The Kohl's card customer is expected to continue performing well, with ongoing efforts to enhance engagement through targeted promotions.

Sephora Strategy: Plans to introduce new brands and improve underperforming categories, with a focus on leveraging successful fragrance lines.

Capital Allocation: Emphasis on investing in business initiatives and maintaining a strong balance sheet before considering share buybacks. Overall, Kohl's Q1 2026 results reflect a cautious optimism with strategic initiatives beginning to take hold, though challenges in sales performance and economic pressures remain significant considerations for the future.