It’s been a bumpy ride for Kohl’s Corp. over the last several years, but for the first quarter of this year, the retailer cited improvements in some key metrics, including driving expenses down and reduced top- and bottom-line declines.
Also highlighted were proprietary brands, which are key to Kohl’s turnaround efforts and showed gains last quarter.
For the three months ended May 2, Kohl’s net sales decreased 1.7 percent to $3 billion, with comparable sales down 1.1 percent.
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The net loss was $14 million, or 13 cents per diluted share, compared to a net loss of $15 million, or 13 cents per diluted share, in the prior year.
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Operating income was $46 million compared to $60 million in the prior year’s period. Executives attributed the drop in part to buying back some debt and increased investments in proprietary brands. As a percentage of total revenue, operating income was 1.4 percent, a decrease of 41 basis points year-over-year.
Gross margin as a percentage of net sales was 39.9 percent, an increase of 4 basis points year-over-year.
“I do see momentum in the business,” Kohl’s chief executive officer Michael Bender told WWD Thursday. “We had our best comp sales performance in over four years. Even though it was down, that 1.1 percent is an indicator of progressive improvement.
“What I love about the quarter was that at the top line, there were several key categories that delivered,” Bender added. “It wasn’t just one area of the business. Proprietary brands were up 6 percent overall in the quarter. Men’s, women’s and kids’ performed really well,” Bender said, citing proprietary brands Lauren Conrad, Vera Wang, Nine West and FLX.
Bender also said proprietary brands helped drive the performance of Kohl’s credit card customers nearly back to positive territory. “The sector was down 6 percent in the fourth quarter of last year, down mid-teens earlier last year, but flat in the first quarter. We are making that march back towards positive territory with a key consumer that’s also one of our most loyal.”
Bender told WWD that Kohl’s is focused on providing “trip assurance” from an inventory standpoint. “We serve a low-to-middle income customer who is a bit more [financially] stressed today than ever, and so when they choose to go to our website or visit our stores, we want to make sure we have what they’re looking for. So we’ve been on this journey of managing the balance between the array of choices we offer and the depth associated with those choices. We are making adjustments by providing less in the way of choice and more in the way of depth. That’s helping to provide clarity in our offering.”
Bender pointed out that consumer confidence is at an all-time low primarily due to concerns over inflation, rising energy and food prices, and the labor market.
“The consumers we serve are making hard choices around putting gas in their car, putting food on the table, and paying the light bills. Who do they go to where they feel they can stretch their dollars the best? So we’re leaning into value and that’s one of the reasons we feel good about the proprietary brand performance. Many of these brands offer an opening price point,” he said.
Asked about the state of the business so far in the second quarter, Bender said, “We feel good about how the second quarter started. We have two thirds of the quarter left to go, against a fluid backdrop.”
In other key metrics, selling, general and administrative (SG&A) expenses decreased 1.6 percent year-over-year, to $1.1 billion. As a percentage of total revenue, SG&A expenses were 36.2 percent, an increase of 15 basis points year-over-year. Inventory was $2.9 billion, a decrease of 8 percent year-over-year.
The Menomonee Falls, Wis.-based retailer forecasts that for 2026, net sales and comparable sales will range from down 2 percent to flat. Adjusted diluted earnings per share are seen coming in at $1 to $1.60, while adjusted operating margin is seen ranging from 2.8 percent to 3.4 percent, and capital expenditures are seen ranging from $350 million to $400 million.
The results and the forecast went over well on Wall Street Thursday morning, with investors pushing Kohl’s stock price up over 19 percent or $2.44, to $15.37.
In his prepared statement, Bender said, “We are pleased with our start to 2026. Our key initiatives continue to drive progressive improvements to the business, resulting in our best comparable sales performance in over four years. In addition, we continue to manage the business with great discipline leading to strong expense management, cleaner inventories, and an improved balance sheet.
“Moving forward, we remain committed to delivering more value and a better experience to our customers. I would like to extend my sincere gratitude to all of our Kohl’s associates for their dedication and determination to execute against our initiatives,” Bender said.